TELECOM Eireann will soon be forced to divest itself of Cablelink, paving the way for competition in the Dublin residential market cable market, according to Mr Denis O'Brien, chairman of Telccom's rival ESAT Telecom.

Speaking at a luncheon organised by the Chartered Institute of Management Accountants, Mr O'Brien said ESAT Digifone, the venture between ESAT Telecom and Telenor, would launch its mobile phone service "on time". But he said the company would not commit itself to a specific date until it was sure the network was in perfect working order.

The Government is in discussion with the European Commission over the proposed sale of a 20 per cent stake in Telecom to KPN Telia and Ireland's proposed derogation from full telecommunications competition until the 2000. Some industry analysts have suggested that the Commission would demand that Telecom Eireann sell off its interest in Cablelink as a condition of EU Commission approval of the derogation.

In his address yesterday, Mr O'Brien said he believed Telecom would be forced to divest its 80 per cent stake. With cable companies set to emerge as credible providers of telephone services, Telecom Eireann will thus face real competition in the residential market in Dublin.

He also accused the Government of orchestrating delays in introducing competition in the telecommunications sector.

"The State is flogging a chunk of Telecom Eireann to KPN Telia, which we all know to be Unisource through the back door. ,The message from Dublin was clear round up all the wagons, and close the shutters to competition," he said. KPN and Telia are both members of the Unisource consortium.

Mr O'Brien said Ireland was about to witness an explosion in the use of mobile telephone.

"High speed, low cost communication are essential in every modern economy," he told the gathering. "Initially, the mobile phone was seen as an executive perk. Now it is much more likely to be regarded as an essential business tool - even a social necessity."

Launching a broadside against Telecom Eireann, Mr O'Brien, said that although we live in the information age, access to the Irish information highway was excessively expensive. "It is littered with potholes, with the State company manning the turnpike, putting even Dick Turpin to shame."

. The Government should move to separate Cablelink from Telecom Eireann, Mr Bobby Molloy, TD, Progressive Democrat spokesman on Communications, said yesterday. Mr Molloy said that inefficiencies in the Irish telecommunications sector were now costing phone users £100 million a year.

The sale of a stake in Telecom Eireann to KPN Telia would copper fasten Telecom's monopoly and prevent any spin off of Cablelink, he added.