BUSINESS and mobile phone users should gain most from Telecom Eireann's strategic alliance with its new partners. The alliance with the Dutch Swedish consortium, KPN/Telia officially launched yesterday should ultimately lead to cheaper call charges.

Telecom will now have access to a series of international networks for which it will be able to negotiate more favourable rates. The company has pledged to pass on these savings through cheaper call rates.

KPN is the Dutch national telephone company and Telia is the Swedish national phone company. Both have already undergone major restructuring and face strong competition in their own local markets.

However, the very attractive aspect of the alliance for Telecom is that the two companies are 25 per cent shareholders of Unisource, a European consortium which also includes Spanish phone company Telefonica and the Swiss national telephone company.

They in turn are linked to AT & T, the biggest telecommunications company in the world, through a company called Uniworld. Now that Telecom is indirectly linked to Unisource, it says it will get cheaper international rates from these networks. (When Telecom routes calls outside Ireland it has to use a variety of networks).

"Although Ireland is a very small market, it is a very concentrated one," says Paul Smits, chief executive of Unisource and former KPN employee. Ireland has a very good call centres business, for example.

The IDA has been targeting call centres companies in recent years and has enjoyed considerable success in attracting leading firms to Ireland. IDA Ireland chief executive, Mr Kieran McGowan has stressed that Telecom's competitive charges packages have been a vital factor.

Paul Smits stresses that business users need an integrated package of services. "Big multinationals, wherever they are in the world, want a seamless contract of telecommunications services, including voice and data," he explains.

He says one of the attractions for Unisource is that its Telecom connection will help Unisource further in its ambition to be seen as a major international telecommunications player in the EU.

Under the alliance, Telecom will also become the official distributor for Unisource products. This will enable Telecom to offer companies a broader range of products, many of which are used in call centres.

KPN, the Dutch state telephone company includes its postal and telecommunications service (PTT Telecom). Like Telecom it needed, and is still undergoing, restructuring.

It currently employs 32,000 people but plans to reduce the number further. The company is directing more people into sales and marketing and has created 32 regions to develop its business. Like Telecom it currently has a monopoly on simple voice telephony (i.e. domestic users phones) but there is competition in the mobile sector.

PN's vice president, Johan Kooij, believes that substantial business growth can be achieved through providing Internet services. Home shopping is one area which he believes offers great potential.

But it is clear that both KPN and Telia firmly believe that mobile phone telephony is where the real growth lies. KPN currently has 800,000 mobile customers and aims to increase this substantially by the year 2000.

Telia, which has been in mobile telephony for many years, claims 27 per cent of the Swedish population has a mobile phone. Currently there is one mobile phone for every 230 people. By 2000 it envisages that nine out of ten people will have a mobile phone.

Telia admits it is still only a "vision" but points to the fact that last year one million mobile phones were sold in Sweden.

In contrast Telecom only has 7 per cent penetration in the mobile phone market, or 200,000 subscribers. Three senior Telia personnel have recently been appointed to Eircell, Telecom's mobile phone subsidiary.

Once Esat overcomes its difficulties competition in the mobile market will intensify. Telia says it is no stranger to competition - it currently competes against two other operators in Sweden.

Telia's Jan Abrahamsson, manager of strategic development, recounts an example of getting a call from a large business user. The client said he had been offered 800 free mobile phones by a rival company if he switched his business. Mr Abrahamsson says the client told Telia it had three hours to come back with a better offer.

Mr Abrahamsson stresses the importance of moving quickly in this changing market, and admits that Telia has lost some, business to rivals, by not responding to such challenges quickly enough.

Unisources's Paul Smits says that fixed line telephones will be a thing of the past ten year's time. KPN and Telia are a little more restrained in their predictions.

For Telecom, there is obviously great potential to develop this market, a point not missed by its new partners. Smits says that the price of calls will continue to fall. "Tariffs will go down a lot more rapidly than you could imagine," he says.

Under a deal agreed with former Communications Minister Michael Lowry, Telecom has agreed to reduce its basket of charges by at least 6 per cent per annum over the next five years.

For KPN and Telia, investing in Telecom brings with it the prospect of reaping a rich reward some years down the line. They will be able to sell off some of their stake after three years, provided they purchase the remaining 15 per cent for £200 million.

If further parts of Telecom are privatised the investors will get cash from the sale. Although state owned, Telia executives would like to float the company and so are not averse to privatisation. KPN is quoted on the Dutch and New York Stock Exchanges.

Also, as both companies expand their investments in Europe and elsewhere they will have access to Telecom's expertise. For example, Telecom currently has 500 employees working with British Telecom. Like ESB International, it also has a consultancy arm, with project management experts.

For now, much work remains to be done to bring Telecom up to speed and prepare it for major international competition. "There is a lot to be done, and it must be done quickly," said one Telia executive this week.

None of the partners oppose cost cutting, although Telecom would claim that the matter is already well in hand. In a New Year message to all staff, earlier this month, KPN chairman Wim Dik said departments should be able to fill vacancies in the most cost effective and efficient location.

An added factor is that Telecom is likely to be ordered to sell its 75 per cent shareholding in Cablelink. The matter is currently being reviewed at EU Commission level as part of a wider review of the cable industry.

KPN was recently ordered to divest itself of its cable company and Telecom executives admit privately that it is almost inevitable that it will have to be sold. However, it would raise valuable cash for restructuring. Just how quickly Telecom becomes a major player itself, remains to be seen. Telecom sources are confidently predicting that the company will spend up to £100 million itself, on a European investment "within 12 months".