COMSOURCE - a consortium of KPN and Telia - is paying £183 million for an initial 20 per cent stake in Telecom Eireann. The two companies have an option to buy a further 15 per cent for £200 million. The deal was approved last month by the EU Commission.

Under the strategic alliance deal, Comsource may pay an additional amount if Telecom achieves certain financial targets. At the time of the sale, the Government said that these payments were likely to exceed £100 million.

Under the clawback arrangement, Telecom will be revalued in three years either by independent consultants or by selling some shares into the market. The difference between what 35 per cent of the company is then worth and the £383 million which Comsource will have paid - assuming it takes up the additional 15 per cent - will form the basis of the additional payment.

This mechanism was devised to allow the State to benefit from the hoped for improvement in Telecom's performance and to allow Comsource to take a step by step approach to the alliance. Negotiations are also underway to give Telecom Eireann's workers a stake in the company.