Over the next few days, each of the 2.8 million people on the electoral register in the Republic will be invited to register for an allocation of shares when the Government sells at least 20 per cent of Telecom Eireann in June or July.
Anybody interested in buying Telecom shares is strongly advised to complete the registration forms and return them to the Telecom share information office using the enclosed reply-paid card. Completing the registration form involves no obligation to buy Telecom shares when they are offered for sale, but those who do register will be at an advantage when they are finally allocated.
If the Telecom share offer is over-subscribed, as seems likely, those who have registered will receive priority over those who have not. They will also receive directly all of the documentation associated with the share offer.
It is not essential to register if one wishes to buy Telecom shares, but given the likelihood of over-subscription it makes sense to register, especially as registration does not involve any compulsion to buy.
The retail share offering is open to anybody over 18 years of age with an address in Ireland. Individuals will be restricted to making one application in their own name although parents, grandparents or guardians will be able to register for an allocation on behalf of minors.
A special auditor, PricewaterhouseCoopers, has been appointed to monitor applications to ensure that people do not make multiple applications for Telecom shares.
People who live in Ireland but are not on the electoral register - either because they are non-nationals or because they neglected to get themselves on the electoral rolls - can register for a share allocation in a number of ways:
Registration forms will also be available from branches of AIB, An Post offices and Telecom Eireann telecentres.
To register by telephone, people should call Freefone 1800-715 111. This line is open every day from 8 a.m. to 11 p.m.
Registration forms will also be included in advertisements in newspapers from April 29th onwards.
In mid-June, a few weeks after Telecom publishes its financial results for the year to the end of March, a prospectus on the flotation and an offer to buy shares will be circulated to everybody who registered for a share allocation.
Those who have not registered will have to apply separately for the prospectus and offer for sale documents.
People will be able to apply for as many shares as they want, but should resist the temptation to be greedy. Those applying for a large number should be aware that because the retail offer is likely to be over-subscribed, large applications could be scaled back considerably.
Even a 10 per cent take-up on the retail offer would mean that 280,000 people would apply. If this is the case, allocations may be no more than £500 worth of shares. The chances of somebody applying for, say, £10,000 worth of shares getting anywhere near that amount are remote.
Applications will not be for a specific number of Telecom shares but for a specific figure, for example £500 worth, £1,000, £5,000 etc - and the number of shares that anybody will receive will only be established after a price has been set.
Applications for shares will have to include a cheque, bankers draft or direct debit mandate. In the event of the likely over-subscription, excess cash will be returned to those applying for shares.
The offer period will remain open until late June/early July by which times the price at which Telecom shares are being offered and the basis of allocations will be established.
Neither the Minister for Public Enterprise, Ms O'Rourke, nor her advisers would say whether retail investors would get any special incentives to buy shares. But Mr Colm Doherty of AIB Capital Markets said that similar privatisations in the UK and Europe included incentives such as discounts on the offer price to bonus shares and loyalty shares. He was at pains, however, to stress that no decision had been taken on any such incentives in the case of Telecom Eireann.
Stockbrokers BCP estimate that Telecom may be offered to the public on the basis of a valuation of €6 billion (£4.7 billion) but that the value of the company will rise to €7 billion (£5.5 billion) when the shares begin trading, "allowing initial investors to secure a 17 per cent return on their initial investment".
BCP says Telecom will become an attractive target in the future and this will boost its valuation further.
Telecom shares are likely to begin trading on the stock markets in Dublin, London and New York in July. While applications will be made directly to the Telecom share registration office, anybody wanting to sell their shares after trading begins will have to use a stockbroker.
It is likely that most stock-broking firms will offer special arrangements for those wanting to sell shares, probably involving a flat fee rather than the usual commission on the sale.
Editorial Comment: page 17
