THE GOVERNMENT intends to reinvest in Telecom Eireann £220 million of the proceeds of the sale of a 35 per cent share in the company. It hopes to raise up to £500 million from the sale of the stake.
In a major overhaul of the way the telecommunications industry in Ireland is regulated, the Government is to establish a new regulatory authority. This will be independent of the Government and will have full authority over telephone charges and services.
Legislation to create the independent regulatory authority and to provide for the strategic alliance is expected to be in place by the middle of this year.
A memorandum which includes details of Telecom's performance, future prospects and the Government's proposals for the regulation of the telecommunications industry is being sent to the six international groups which have expressed interest in forming a strategic alliance with Telecom.
"The selection of a suitable strategic alliance partner for Telecom is well under way according to the Minister for Transport, Energy and Communications, Mr Lowry,
The six groups which have expressed interest in an alliance with Telecom are British Telecom, the European consortium Unisource, US West, Tele Danmark, Singapore Telecom and Airtouch, another American group. Of the six, British Telecom is seen as the favourite to become a partner and minority shareholder in Telecom Eireann.
As well as indicating a bid price the groups are being asked to make detailed presentations on how their alliance would assist Telecom to meet customer needs, particularly those of multinational companies.
Formally announcing what is in effect the biggest ever sale of a state asset, Mr Lowry said that £220 million of the proceeds would go to Telecom itself. The Government plans to use the balance to reduce or eliminate the Exchequer's £250 million liability to the Telecom pension fund.
Traditional methods of comparison suggest that 35 per cent of Telecom might be worth between £300 million and £350 million. But competitive bidding and an expectation that a restructured Telecom could become far more profitable may push the buyout price closer to the Government's £500 million target.