THE initial bid by KPN/Telia, front runners to acquire a 35 per cent stake in Telecom Eireann, is understood to be under £200 million, less than half the figure expected by the Government.
Mr Stig Johansson, director of international investments for the Swedish state owned phone company Telia, said its initial bid "involves an investment of about one billion crowns" (about £95 million).
While the final shape of the consortium is not yet decided, the bid is understood to involve a 50:50 partnership between Telia and the Dutch phone company, KPN. On the basis of an equal partnership, KPN/Telia's offer would be just under £200 million.
Initial bids are usually indicative offers and can be driven upwards in subsequent negotiations. But a £200 million offer is well below the original target. Two years ago the British telecommunications company Cable and Wireless made an offer of £460 million for a strategic stake in Telecom.
In addition to price, the initial bids had to outline proposals for transfer of technological and marketing skills to Telecom.
Confirming the KPN/Telia bid, Mr Johansson told Reuters: "We have submitted a non binding bid, a letter of intent." Through Telia and KPN, Telecom Eireann would be given access to the pan European network formed through the Unisource joint venture, he said.
"The Irish Government thinks that Telecom Eireann needs a strategic partner with experience of deregulation and competition. It needs a partner that will give it global connectivity, especially for business customers. This partner would then have the option of buying about 3,5, per cent of Telecom Eireann.
Mr Johansson continue: "I think the Irish Government will come back to us within three or four weeks. Then it will take some time before a final decision is made."
KPN/Telia's was one of only two bids for the Telecom stake received by the Government by last Friday's deadline. The other bid came from the Danish national telephone company, Tele Danmark.
The US company Bell Atlantic, which had been involved in talks until the deadline, did not lodge a bid. In the early stages up to 10 companies or consortiums had expressed an interest in forming a strategic alliance with Telecom. But the Government's plan to offer a 35 per cent stake in the company to a suitable strategic partner was dealt a blow earlier this month when British Telecom and its US partner MCI withdrew from the bidding. BT had been one of the favourites to become Telecom's strategic partner.
The withdrawal of BT not only removed a strong contender from the race but it means that the remaining contenders had to reassess whether BT intended to become a strong competitor for Telecom in the Irish market.
While Fianna Fail has called on the Government to abandon its alliance plan, the Minister for Communications, Mr Lowry, is pressing ahead to sell the 35 per cent stake. Both bidders are in a strong position to assist Telecom Eireann in its development as it prepares for a fully competitive market, he said.
The preliminary non binding bids are now being assessed and negotiations will take place with the bidders before final binding offers will be sought.