THE price reductions package announced by Telecom Eireann yesterday means prices are to be cut by £210 million over a three year period.

For the State operator, still burdened by heavy debt - currently around £600 million - it also means the way ahead is firmly mapped out.

Telecom hopes to fund the reductions, which over a three year period amount to 20 per cent of income, through tight control of its cost base and growing the telecoms market.

With the economy booming, growing by 5-6 per cent a year, and the increased usage caused by lower prices, industry sources say generating extra revenues to offset the reductions should be easily attainable.

Telecom is also seeking to invest abroad, possibly up to £100 million in other developing telecoms markets.

This would most likely be done through its strategic alliance partners, KPN and Telia, which have brought financial muscle and expertise to the company.

Telecom's chief executive, Mr Alfie Kane, who announced the reductions at the Communications 97 conference in the RDS, Dublin yesterday, was characteristically blunt about its charges yesterday.

"Telecom's prices have always been at a level which were not sustainable in a competitive market," he said.

"We have made it clear that we will have prices that are competitive across all ranges by the year 2000."

It is the response to competition which has driven down Telecom's prices. The company is benchmarking itself against British Telecom which, it says, has one of the most competitive cost structures in the world.

Its charges to Britain at 20p per minute (excluding VAT) are the same as the rate from Britain to Ireland charged by British Telecom.

The company has promised to introduce reductions in national long distance calls later this year. Mr Kane says these charges remain unacceptably high.

At present, it costs around 20p per minute and Telecom would like to reduce them by around half eventually.

In choosing call charges to Britain and the US, it has made reductions which account for 75 per cent of the market. The remaining 25 per cent is traffic within the EU.

Although Telecom maintains these reductions are targeted at all sectors, including the residential users, they are clearly tariffs which focus on the business user.

The move will also help secure more business for Ireland's fast growing teleservices industry.

Holland and Ireland are the two biggest locations for US teleservices companies outside the US.

Telecom has worked closely with the IDA to produce attractive telecommunications packages for such firms, where 50 per cent of costs are often phone charges.

Despite the apparent enormity of the reductions, industry sources were underwhelmed yesterday. One source pointed out that it was estimated that each employee in teleservices companies makes £15,000 worth of calls per year.

With around 4,000 teleservices/call centre jobs at present, this represents £60 million per annum.

However, Telecom would have to pay a percentage of such calls to other operators where the call originated in another country.

None of Telecom's competitors was fazed by yesterday's announcements.

TCL Telecom said it had factored in its own price reductions in its three year plan. Esat Telecom said it had written to its customers last week, saying it would be implementing price reductions from May 1st.