THE Government has moved to prevent Esat Telecom and other private phone companies offering new customers voice telephone services through Telecom Eireann's network.
Esat and some other smaller operators use routers or autodialers which divert long distance and international phone calls to their networks via Telecom's local network.
The Department of Communications said yesterday it had instructed Telecom Eireann to cease providing services to rival phone companies which operated in this way.
Companies which use lines leased from Telecom Eireann to provide an alternative service are unaffected.
The move is intended to maintain Telecom Eireann's monopoly over voice telephony ahead of the sale of 35 per cent of the company.
The timing of the announcement is crucial, coming as Telecom Eireann and the Government are about to enter full negotiations on, the sale of the Telecom stake with KPN/Telia, a consortium including the Dutch and Swedish telephone companies, and Tele Danmark. The Government hopes that the protection of Telecoms position will allow it to sell at a higher price.
However, Esat Telecom, which is Telecom Eireann's largest competitor, said last night that it had enough capacity from Telecom Eireann to service its existing customers and allow for some expansion.
A spokeswoman for Esat said last, night it would be "business as usual" at the company after the Easter weekend. However, she confirmed the company could not obstain any additional capacity from Telecom Eireann.
A spokesman for Telecom Eireann said: "Clearly Telecom Eireann will operate within the law and will abide by the directive issued by the regulator."
The Esat spokeswoman expressed confidence that the situation would be resolved before Esat would need any new capacity. Esat claimed it was within its rights to use autodialers and said it had the support of the European Commission on the issue. However, it had no "immediate plans to mount a legal challenge to the Government's decision.
Esat Telecom is a 40 per cent shareholder in Esat Digifone, the consortium currently negotiating a licence for the second mobile phone network with the Government. The licence negotiations are at a very, advanced stage, with the consortium, which includes Norwegian company Telenor, hopeful that it would sign the licence within a fortnight.
Esat Telecom is also engaged in a fundraising in the US aimed at raising £30 million to pay its share of the £100 million cost of building the new network and also to expand its long distance network. One US investment source has already expressed concern about the consequences for Esat if the use of autodialers is blocked.
The maintenance of Telecom Eireann's monopoly on voice telephony for as long as possible is seen as crucial to the Government's plans to find a joint venture partner for the company. The value of the 35 per cent stake would be dramatically altered if the company lost its monopoly on voice telephony.
The Department said last night that the "Government has decided that voice telephone will continue to be the preserve of Telecom Eireann until full liberalisation in January 2,000".
