TELECOM Eireann has been receiving plenty of press coverage in recent times as the build-up to the June flotation of the company approaches.

Much attention has highlighted that the workforce stands to benefit from a very handsome windfall if the valuation of the company achieves recent broker estimates of £5.5 billion (€6.98 billion). Also Telecom Eireann's strategic partners - Telia and KPN - stand to see substantial uplifts in the value of their stakes in the company.

The Government is coming under fire for selling the workers their stake at too low a price and without any clawback arrangement as is the case with KPN and Telia. However, it must be emphasised that the valuations that the market is currently placing on telecom companies are far higher now than they were even 12 months ago.

In fact, the share prices of many telecom companies have doubled in the past year, vastly outperforming overall market indices. These high valuations are by no means guaranteed to persist and indeed during the week British Telecom stocks fell sharply as the German company, Veba, placed its entire 10 per cent stake in Cable & Wireless at a very sharp discount of more than 10 per cent to its most recently traded share price.

A general rise in interest rates and bond yields is another development that would cause a substantial decline in the valuation of these companies given that they are all now trading on very high price/ earnings ratios. While any such rise looks very unlikely, the possibility cannot be entirely ruled out.

Assuming that Telecom Eireann achieves a valuation of £5.5 billion, how will it compare to its peers in Europe? The table highlights that it will be one of the minnows of the industry even though it will account for about 11 per cent of the overall Irish market. Only Tele Danmark and Portugal Telecom will be comparable in terms of size.

Assuming reasonable market conditions the flotation should meet with very large demand both domestic and international. The company has made huge progress in recent years in paying down debt and in improving work practices. Underlying growth has been rapid. Total telephone lines are now at 1.5 million compared with just under 1.2 million in 1994.

Eircell now has 415,000 mobile phone lines, which reflects a growth of 44 per cent over last year.

With optimistic forecasts regarding the medium-term prospects for the Irish economy still in the ascendancy, Telecom Eireann will be viewed as a very attractive investment opportunity by a wide range of investors. Not alone will it be the largest Initial Public Offering (IPO) on the Irish market, but it is almost certain to create a huge increase in the number of private individuals that invest in the stock market.

Therefore the Telecom IPO is likely to add enormous impetus to the current trend of increased private client involvement in the equity market.