Chairman's resignation unlikely to derail timetable for Telecom flotation

Mr Brian Thompson: wealth of international experience and man who made "sparks fly"

The resignation of Mr Brian Thompson as chairman is unlikely to derail the timetable of the Telecom Eireann flotation. Only a change in stock market sentiment will do that. But it is an acute embarrassment to a Government and a Minister who were understandably delighted to have "netted" a chairman of Mr Thompson's standing. It will put pressure on all concerned - and particularly the board and new chairman Mr Ray MacSharry - to make sure the flotation now proceeds without a hitch. The Minister for Public Enterprise, Ms O'Rourke, had made much play of having a high profile chairman with telecoms and public company experience and now the man who fitted the bill has had to be hastily replaced.

It was on the advice of the Government's own advisers on the flotation - AIB Capital Markets and Merrill Lynch - that Mrs O'Rourke, asked five board members to resign their positions earlier this year. This was done so that the board could be beefed up with more business "names" prior to flotation. A heavyweight board, it was argued, with people with telecoms experience and proven public limited company credentials, was crucial to help maximise the price. A chairman of Mr Thompson's standing would go down well with US investors, whereas Mr MacSharry has no telecoms experience and will not have the same clout in the US.

Mr Thompson is well-regarded in the US, where he was formerly executive vice-president of MCI Communications (now MCI/ WorldCom) and later chairman of Qwest, one of the world's largest telecommunications groups. Telecom's shares will be listed on the Dublin, London and New York stock exchanges when the company floats, probably in early July. The Government is anxious to float the company this summer as sentiment towards telecoms stocks is now strong.

Although Ms O'Rourke has signalled that she wants a large takeup of shares by ordinary Telecom customers - with the public to subscribe for more than 50 per cent of the shares being issued - it is important that there is a strong mix of financial institutions as well.

A key task of the Telecom Eireann chairman is to go on the roadshows with senior company executives to make presentations to institutional investors to persuade them to buy the stock. Mr Thompson was replaced by former EU Commissioner Mr MacSharry, within hours of the announcement that he had taken up the GTS chief executive's job. Although well-respected in business in Ireland and acknowledged as a good EU Commissioner, Mr MacSharry does not have the same background knowledge of telecoms as Mr Thompson, or Mr Ron Bolger, the current deputy chairman, have.

Mr Bolger had been chairman of Telecom for six years and sources said he had travelled to New Zealand and Australia to see how IPOs (initial public share offerings) had been conducted there. "He had really immersed himself in the process," said one source.

"The chairman and his or her experience and track record is an essential part of the matrix when European and US funds are deciding whether to invest," said one source. "They like to know how many years experience the chairman has, where he has come from, etc."

In an interview with The Irish Times in January, Mr Thompson emphasised the importance of the roadshow. "Investors take an awful lot out of a roadshow - they look in people's eyes; it's tough but required," he said.

It is understood the Government heard late on Friday night that GTS was going to announce his new position yesterday. He did not indicate that he saw any problem with it. However, the Government's advisers examined the GTS position over the weekend. They decided there was a conflict and brought it to his attention. He then resigned.

Although the Government moved swiftly last night to put a positive spin on it, saying he had played an enormous role in positioning the company for its forthcoming flotation, it is understood to be extremely embarrassed and disappointed by the matter. When Mr Thompson was appointed just two months ago, Ms O'Rourke said he had a wealth of international experience.