A PRICE war between Telecom Eireann and its competitors looks set to erupt following the EU's decision yesterday to order Ireland to open up the business sector to more competition. The Commission also warned that Telecom's involvement in Cablelink, the cable television operator, was under consideration.

Telecom said last night that it would compete "very aggressively" for the business users' market. "We are committed to further price cuts," said a Telecom spokesman.

The EU Commission announced that, as expected, it had decided to allow Ireland to keep its monopoly on voice telephony (i.e. domestic users' telephones) until the year 2000.

Telecom will also have a monopoly on handling international calls to mobile telephones until January 1999.

In return, Ireland must open up closed user networks from next July. This means that organisations which have their own networks - such as the banks, the ESB, CIE and RTE - will be able to use their own systems, without going through Telecom.

More importantly, Telecom's competitors will be free to approach these organisations with a view to using them to carry their business calls via these networks, thus opening up the fight for corporate telecommunications business to much greater competition.

Some of Telecom's competitors have said they are very disappointed with the Commission's decision to grant the derogation - on basic voice telephony.

"It is a shame that it will be another three years before domestic users will benefit from the effects of lower prices," said Mr Mark Roden, chief executive of Esat Telecom.

The decision to open up alternative infrastructures from next July - the Government had fought hard for a derogation here until 1999 - has been warmly welcomed by Telecom's competitors. Some of them may use alternative networks, instead of leasing lines from Telecom, for which they claim they are being charged exorbitant rates.

The Commission's decision comes as Telecom is finalising its proposed strategic alliance with KPN/Telia, a Dutch Swedish consortium which is buying up to 35 per cent of the company. This deal is being examined separately by the Commission.

The Minister for Transport, Energy and Communications Mr Lowry last night welcomed the Commission's decision.

"This is good news first and foremost for telecommunications consumers who will see greater choice, higher quality and lower prices starting from next year," he said.

He added the Commission decision was "in line with my strategic intent for the Irish telecommunications sector, aimed at accelerating the changes that are necessary for the sector".

Mr Lowry said the Commission's decision provided the transition period required by Telecom Eireann for voice telephony and underlying infrastructure to restructure its operations and efficiency while at the same time clearly setting out the road to free and open competition in Irish telecommunications to provide the best possible service to users".

The chief executive of Cable & Wireless's Irish division, Mr Nick Koumarianos, said the Government and Telecom were fortunate to get derogations to the year 2000, "considering how advanced the system is and considering that the strategic alliance is now in place".

Mr Koumarianos, whose company is a competitor of Telecom, added it was the start of real choice for business users in Ireland and said he looked forward to the rapid implementation of the derogation on closed user groups in Ireland.

Announcing its decision yesterday, the Commission said the voice telephony request was granted because Telecom had a need to rebalance tariffs and increase telephone penetration before the introduction of full competition.

It said the request for a derogation on closed user groups until 1999 as unjustified.

However, it said that Telecom's 75 per cent stake in Cablelink would be examined in the context of the investigation under the Merger Regulation procedure.

Esat said it looks forward to an early review of Telecom's control of Cablelink "which continues to raise serious competitive concerns, given Telecom's parallel monopoly over residential telephone services".