THE sale of 20 per cent of Telecom Eireann to the KPNTelia consortium was described as a "betrayal of the taxpayer" by the Fianna Fail spokesman on communications.

Mr Seamus Brennan said that Fianna Fail was opposing the Telecommunications (Miscellaneous Provisions) Bill, giving effect to the measure, because the party believed the Irish people had been shortchanged by the "scandalous deal" done by the Minister for Communications, Mr Lowry.

"The Bill is seriously flawed in several respects and reflects the Government's incoherent strategy for Telecom."

He said that up to £2 billion had been invested in the telecommunications service and now 20 per cent of it was being sold on the cheap, in a panic sale.

"The price achieved is derisory and seriously undervalues a major national asset. Twenty per cent of Telecom, which includes Eircell and Cablelink, is worth three or four times the £183 million price achieved and will be sold for this early in the next decade. However, the beneficiaries will not be the State, Telecom or its subscribers, but Swedish and Dutch investors," Mr Brennan said.

Defending the Bill, Mr Lowry said that it laid the foundation lord the transition to open competitive markets in the provision of telecommunications services and enabled Telecom Eireann to meet the challenges facing it in that new competitive environment.

The strategic alliance arrangement with the KPN Telia consortium involved three agreements: share purchase, under which the consortium would acquire its equity stake in the company, a shareholders' agreement, which sets out the framework for the relationship between the Minister and the consortium on the governance of Telecom Eireann, and agreement on strategic co operation, setting out the contributions to be made by the consortium to Telecom Eireann at strategic and operational levels.

An important component of the strategic alliance transaction, and in the achievement of the benefits of the alliance, was the opportunity which would be afforded to the staff of Telecom Eireann to share in the growth of the company, Mr Lowry added. The Bill enabled the company to issue, and the Minister to transfer, shares in the company for employee share holding schemes.

Mr Lowry said the office of the Director of Telecommunications Regulation would be established under the Bill. It would be a position within the civil service and the appointment would be for up to six years. The Bill required the Minister, in consultation with the Minister for Finance, to provide staff, premises, equipment and other resources required by the director for the performance of his or her functions.

Mr Des O'Malley (PD, Limerick East) expressed concern that the regulator and staff would be drawn from the civil service, adding that it made him wonder about the degree of independence they would have. He believed the regulator should be from outside the public service.

Questioning the way the sale of the Telecom stake had been handled, Mr O'Malley said the Exchequer would receive nothing. The purchase price would be reinvested in the company, which meant that the KPN Telia was getting its own money back.

He added that a well managed and independent Telecom Eireann would have been able to command the confidence of international institutional investors. The company could then have pursued a strategic alliance on its own terms without any Government interference.

Mr Phil Hogan (FG, Carlow Kilkenny) said that the opposition of Fianna Fail and the PDs to the Government's decision to partially privatise Telecom Eireann was the ultimate in hypocrisy and opportunism. The Bill was doing exactly what the two parties had spoken about for years but failed to agree on.

Debate on the Bill was adjourned.