Esat Telecom should make an operating profit - before interest charges - by the end of 1999, its chairman, Mr Denis O'Brien, said yesterday. He also said Esat would compete strongly in the residential market when it was fully opened in December, promising a strong package to woo customers from Telecom Eireann.

Speaking after Esat Telecom Holdings' first a.g.m. in Dublin, Mr O'Brien said the company would be spending £80 million on further infrastructure investment this year and was well-positioned to capitalise on it for competing in the residential market.

However, he admitted that Esat would continue to use Telecom Eireann to carry part of its traffic, "the local loop" where it wouldn't have its own infrastructure for at least another year.

Mr O'Brien again criticised Telecom over its interconnection rates - the rates it charges to originate and terminate calls from Esat customers on its network. He said the State company had been abusing a dominant position.

"It is absolutely inexplicable that the average interconnect rate in Ireland is still almost seven times that in other EU countries, for origination and termination," he said.

Esat has complained to the EU about the matter and a decision is due shortly. Mr O'Brien said Esat was reasonably confident it would win its case and stressed that a favourable decision "cannot be underestimated". He also said a review of Telecom Eireann's cost accounting systems was due soon.

"We are hopeful that these decisions will at last reveal the fact that the State operator has been abusing its monopoly position and has been severely restricting competition as a result," he said. The Esat chairman said the company's fixed line business had 4,000 corporate customers. Esat Home - which provides pre-paid services to the residential market - had 7,000 customers.

Industry observers believe that any telecoms company which is serious about tackling the residential market will need to bid for the cable company, Cablelink. Mr O'Brien said Esat would review its options, but he claimed some of the figures being talked about regarding Cablelink's worth were "off the wall".

Some parties believe Cablelink could fetch in excess of £200 million when it comes to the market.

A Telecom spokesman rejected Mr O'Brien's comments on interconnect rates saying they were completely misleading. The average rate for interconnect was 2p per minute, he insisted. He said Mr O'Brien was referring to SwitchLink which was a different service, introduced by the Telecoms regulator last October.