THE strong economic upturn and the stimulus of free market competition have revitalised once moribund semi state service providers into profitable enterprises, capable of operating independently from the Government which nurtured them. Telecom, Bord Gais and Coillte, the state forestry company, this week showed that, given the stimulus of competition, public sector commercial enterprise can deliver a high class return on assets employed to rival the best in the private sector.

Telecom Eireann, in particular, had a splendid year with growth in its telephone business and tight cost controls producing a 44 per cent rise in operating profits to £183 million. Turnover grew 12 per cent to exceeded £1 billion for the first time despite price reductions to customers, a policy which will continue this year with a further £65 million of cost cutting pledged. The organisation's customer base widened 11 per cent, with an 80 per cent surge in new mobile phone customers.

Telecom's strong cash flow enabled major inroads to be made into reducing its heavy burden of debt, with £159 million of repayments lopping total debt back to £703 million. The group expects to be able to repay another £100 million this year.

The buoyant results will give Telecom some ammunition in its crucial upcoming talks with two potential strategic alliance partners, a consortium of KPN and Telia, the Dutch and Swedish telecommunications operators, and TeleDanmark. Telecom chief executive Alfie Kane believes there is a "reasonable prospect" for success.