Private investors have been guaranteed a 40 per cent share of the Government's holding in Telecom Eireann and could get as much as 60 per cent, depending on the response to the public offering of the Government's 1.08 billion shares in Telecom.

Yesterday, the Government said its shareholding in Telecom would be offered at between £2.64 (€3.34) and £3.27 a share, valuing its stake between £2.8 billion and £3.5 billion.

Analysts believe that to ensure a solid after-market in the shares, the Government will probably offer the shares at close to the midpoint of £2.95, valuing its stake at £3.2 billion.

Assuming this £2.95 price then private investors - and almost 1.2 million people registered for the share offering - will be guaranteed at least £1.3 billion worth of Telecom shares and as much as £1.9 billion worth if they are allocated 60 per cent of the shares.

Private investors and institutions have each been allocated 40 per cent of the shares being sold by the Government - how the remaining 20 per cent is divided will be decided after the institutional and retail offers close.

Private investors can apply for a minimum of £250 and a maximum of £100,000 worth of Telecom shares, but at this stage it is impossible to estimate how many shares investors will get before allocations are scaled back.

If even only 20 per cent of those who registered - about 240,000 people - actually buy Telecom shares, it would give an average of £6,670 worth each.

But that 20 per cent figure is seen as very much the lower end of the estimates for the take-up of Telecom shares, and some market sources believe that the final takeup could be as high as 40 to 50 per cent.

This would mean that Telecom could begin its life as a public company with a shareholder base of more than 500,000 people.

The Minister for Public Enterprise, Ms O'Rourke, has made it clear that she wants the largest possible involvement of private investors in the Telecom flotation and has stated that when it comes to deciding the price of the shares, the Government will try to balance the need to maximise the proceeds for the Exchequer and also to provide a short-term gain for investors.

The Minister will also have to be careful that the shares are not offered at too low a price, for fear of being accused of selling off prime State assets on the cheap.

She will also, however, want to ensure the Telecom flotation is a success, with other state companies like Coillte, Aer Rianta, Aer Lingus and the merged TSB/ACC all apparently in the flotation pipeline.

"One of our main objectives for the share offer was to widen share ownership and by setting the minimum and maximum investments at £250 and £100,000 respectively, we hope to appeal to first-time and experienced investors alike," the Minister stated.

How shares are allocated to the public will depend on the response to the public offering, but it is understood that allocations will be heavily biased towards smaller investors who are likely to receive most if not all of the shares they have applied for.

Larger applications are likely to be substantially scaled back to allow for this bias towards the small investor.

Mr Martin Kane of BCP Stockbrokers said: "Our view is that the Government will lean towards the middle of the range and not push for the highest possible price. After the flotation, the institutions will have a strong appetite for the shares as Telecom will make up around 10 per cent of the ISEQ Index." As well as being part of the ISEQ Index, Telecom will also be part of the Eurostoxx index and will, as a result, be in demand from investors who want an exposure to the euro zone, as well as a direct exposure to the Irish economy and the expected strength in the Irish telecoms market.

Mr Kane added that Telecom's share price, when it began trading, would also include a takeover premium reflecting the view in some quarters that it may become a takeover target from KPN when the Dutch group's 18-month limit on buying more shares expires at the end of next year.

All these factors indicate that institutional investors will be in the market looking to increase their Telecom shareholdings after the shares begin trading.

That is obviously good news for private investors who want to take a quick profit.