Telecom Eireann has promised to maintain telephone boxes in rural areas, but is demanding a fair compensation for providing service to unprofitable locations when competition is introduced in December.

As part of its submission to the telecommunications regulator, Telecom has warned that rural areas could end up starved of investment if the issue is not properly addressed.

Last week, France Telecom said it would dismantle thousands of telephone kiosks across rural France because the increasing popularity of mobile phones had made them unprofitable. The move provoked criticism from regional groups who said it denied the country's poorest and youngest the ability to make calls.

Yesterday, Telecom Eireann admitted that many of the Republic's 7,200 coin and card telephone kiosks cost more to maintain than they brought in, but said it would not follow the French company's lead.

"We feel that the kiosks are part of the fabric of life in Ireland, and we certainly wouldn't envisage any change in that approach," said Mr Gerry O'Sullivan, Telecom Eireann's head of corporate communications.

However, he added, the company was concerned that the as-yet undecided regulations to govern the new competitive environment would allow other companies to cherry-pick the wealthy parts of the market.

The consultation document already published by the regulator, Ms Etain Doyle, remarks that in many countries the incumbent's obligation to serve all customers equally has proved less of a financial burden than first predicted. This implies that new entrants might not have to contribute to a central fund, compensating Telecom Eireann for maintaining unprofitable infrastructure.

But Telecom, which recently made a submission to the regulator, warned that such a "minimalist" approach taken in densely-populated countries such as the Netherlands could have unpalatable consequences in the Republic.

"We feel it would not be in the national interest, and could lead to an imbalance in investment between urban and rural Ireland," Mr O'Sullivan said.

Although Telecom Eireann is currently controlled by the State and is obliged to offer the same service to all customers, the company is likely to be be floated on the stock market within the next year.