Telecom equity sale will go ahead

THE Minister for Transport, Energy Communications, Mr Lowry, is ahead with plans to sell a 35 per cent stake in Telecom Eireann, despite receiving only two bids.

But Fianna Fail has called on the Government to abandon its strategic alliance plan for the company.

The KPN/Telia consortium, consisting of the Dutch and Swedish telephone companies, and the Danish National telephone company, Telex Danmark, lodged preliminary bids by the deadline of noon yesterday. The bids are understood to be well below the £400 million to £500 million original target and may be around £250 million. No bid was received from the US company Bell Atlantic which had also been in discussion with Telecom and the Government up to the last minute.

A spokeswoman at Bell headquarters refused to comment. In a statement, the Minister confirmed that two parties had expressed interest in entering strategic alliance with Telecom Eireann.

"We have received submissions from two parties, each of whom has an outstanding reputation in the telecommunications industry. We are confident that the experience of each of them, both in their own domestic markets and internationally, places them in a good position to assist Telecom Eireann in its development as it prepares for a fully competitive market," the statement said.

But Fianna Fail has called on Mr Lowry "to go back to scratch on the whole process". Its transport, energy and communications spokesman, Mr Seamus Brennan, argued completing a deal would not now be in the State's interests.

With the withdrawal of Bell Atlantic, the competition was now effectively "a one horse race", he said, contending that KPN/Telia was the only realistic bidder.

"You cannot have a competition with one player, especially one that knows it has the Government and Telecom where it wants them . . . Something is fundamentally wrong with a process when eight of the original 10 contenders, including most attractive partners, have withdrawn from the race.

"I believe there is a need to go back to scratch and hold a public and debate on future and State policy on telecommunications. All the options and the many consultants' reports prepared at a cost of over £4 million to the taxpayer should be put on the table for discussion," he said.

However, last night, Mr Lowry signalled his determination to go ahead with the process. Stating that Mr Brennan "seems to be the only one disappointed with the outcome", he said the preliminary proposals would be evaluated over the coming week.

In the course of discussions, Tele Danmark, which is cash rich, could introduce minority partners. Tele Danmark is a publicly quoted company which is 51 per cent owned by the Danish government.

Mr Lowry said the evaluation process would lead to the submission of final proposals to the Government - "as soon as possible". It is understood that a summer target has been set.

In addition to prices, the preliminary bids contain proposals on transfers of skills and technology to Telecom, proposals on new products new services and future development. Since British Telecom withdrew the race, KPN/Telia has been the clear favourite. But the withdrawal of BT has reduced the he Government can expect for Telecom stake from the £400-£500 million originally expected.

Initial bids are thought to be region of £250 million, though there may be "talked up" in the course of negotiations.

Among the qualities required any strategic partner for Telecom access to a global network platform, marketing capability and cash for investment. KPN/Telia is linked to the AT&T global network through Unisource while Tele Danmark is a member of any global alliance.