A SENIOR executive in Telecom Eireann has said that the demand by unions in the company for a significant shareholding strategic sense.

The personnel director of Telecom, Mr Cathal Magee, told delegates to the Institute of Personnel and Development in Galway that the Employee Share Option (ESOP) scheme was "strategically sound because it encourages employees to take a longer term view of business".

The Telecom group of unions is currently in discussions with the Minister for Transport, Energy and Communications, Mr Dukes, about the size of the shareholding that will be made available to them by the Government, as the principal shareholder in the company. The unions are due to meet Mr Dukes next Friday for what union sources have termed a make or break meeting.

Mr Dukes has offered 5 per cent in the short term, while the unions are seeking 14.9 per cent. They are threatening to withdraw from a radical Transformation Agreement with the company if they are not given 14.9 per cent.

Mr Magee said: "We need to be confident that we can conclude a valuable ESOP agreement, so as to enable the Transformation Agreement to become operational." The agreement will cut operational running costs by about a third, or by £110 million.

Changes brought about so far in the company had been based on a traditional approach and involved decisions based on strategic analysis of the industry. The next phase would be both new and more difficult, he warned. The company would now have to persuade staff to engage in a process of behavioural change in order to make it more competitive.

"You cannot mandate behavioural change," he said. "You can only put people in the position of being able to make the choice themselves."

Whether or not Telecom succeeded in creating a new, customer focused performance ethic would only become apparent when the Telecom technician "got out of his van" to do his job.

The Transformation Agreement, which will allow this process to begin, was the result of 18 months of the most difficult and intensive negotiations Mr Magee had ever known. One of the key concepts was to bring employees into a process of change that could last a decade, he said.

He paid tribute to the contribution that the general secretary of the Communications Workers Union, Mr David Begg, had made to the development of partnership in Telecom. The CWU represents 90 per cent of staff and has led the ESOP campaign. Mr Begg's decision to resign from the CWU to become chief executive of Concern was "a significant loss to Telecom Eireann and to the trade union movement but we wish him well in his new position".