It may be a gradual process but there are encouraging signs that Telecom Eireann is coming to terms with the realities of the market place. The company is now embarking on the latest in succession of price reductions announced over the last couple of years. The latest package will save consumers a total of £80 million in a full year. Its chief executive, Mr Alfie Kane, says that the scale of these reductions constitutes the largest-ever cuts package announced by the company. Certainly, the scale of the cumulative cuts will make an impact in every home and business in the State; some £210 million in price cuts will be implemented over the next three years; all calls to the US and Canada will be reduced by 25 per cent from today; the cost of calls to Britain will be cut by 17 per cent.
The company deserves commendation for delivering on its promise to cut prices. Of course there is a sense in which Telecom is making something of a virtue of necessity. For years, both business and residential users had been saddled with unacceptably high charges. Telecom's basic connection charge of £145 (which will now be reduced to £99) was intolerable; the company should have been actively pursuing new business, not penalising those who want to get connected. Thankfully, the commercial environment in which Telecom is operating has changed dramatically; the company is already facing intense competition for many of its key services; within five years, at the outside, it will also be exposed to the full rigours of European competition. And the company is itself looking at expansion opportunities and continually improving its productivity.
Telecom Eireann has already made substantial progress in transforming itself from a cosy monopoly to a lean and competitive public utility. In the past two years some 1,500 employees have left the company as part of the voluntary severance scheme, bringing the present workforce to 11,500. An additional 1,200 are expected to leave over the next two years. There are also encouraging signs that the alliance with KPN-Telia has given the company new momentum and fresh opportunities. Mr Kane has proved to be a capable and, ambitious chief executive who wants his company to emulate -the success - and the competitive cost structures of British Telecom. He has already begun work on consolidating his management team; two months ago nearly 100 of his senior managers were asked to apply for new positions within the company on a personal contract basis.
That said, Telecom is still burdened by heavy debt - currently around £600 million - and it needs to invest over £1 billion to provide the full range of services that industry now demands. The alliance with KPN-Telia has helped to give the company more financial muscle, but it clearly needs even more capital if it is to build an international reputation for excellence. The case for a company flotation on the Stock Exchange is worth examining. Telecom has positioned, itself well for the future; Irish investors should be given an opportunity to invest in the company. But whether this option is taken or not, Telecom will remain under pressure to continue to improve and invest. The company has a derogation from full EU competition until the year 2000, but given the pace of change in the sector, competition is already a reality and can only intensify.