The Exchequer is set to net £1.1 billion (€1.4 billion) as a result of a complex claw-back arrangement which was agreed when KPN/Telia bought into Telecom Eireann.
The money, which is due for payment by January 31st, 2000, will be considerably higher than previously expected.
It had been thought the Exchequer would receive around £800 million from the deal.
A spokeswoman for the Department of Finance said the precise figures on the Exchequer's gain would not be available until February.
The £1.1 billion likely to be received by the Exchequer - it will fall below this figure only if there is continued weakness in the Eircom share price over the coming months - is additional to the £3.3 billion which the sale of the Government's 50 per cent stake in Telecom - now Eircom - raised when the shares were floated in July.
It is also additional to the £200 million which KPN/Telia paid for the 15 per cent stake it had an option on, before the flotation.
The deal with KPN/Telia, a Dutch-Swedish consortium, which bought in through another consortium called Commsource, involved it paying £183 million for a 20 per cent stake, with an option on a further 15 per cent for £200 million.
It bought the further stake before flotation.
At present, KPN holds 21 per cent of Eircom and Telia holds 14 per cent.
The complicated deal was struck in 1995, during the last rainbow coalition.
Although some reservations were expressed at the time - namely that the company was being sold off too cheaply - it is now being viewed as an extremely shrewd deal.
It allowed for, and indeed has now capitalised on, the fact that technology/telecoms stock companies have risen dramatically in value from a stock market viewpoint.
As part of the deal, Comm source was allowed make a 15 per cent return on its investment over three years.
At the time, Eircom was valued at around £1.5 billion. The company is currently valued at around £6.8 billion.
The deal allows the Government to claw back from Comm source 60 per cent of the increase in the value of the company at a given time, allowing for the return on investment to the consortium.
The final price will be determined by using the share price at flotation or the average of the share price in the three months to January 31st, whichever is the lower. At present, taking the value of the company when it was floated at £3.07 per share, KPN's 21 per cent stake is worth £1.43 billion.
Telia owns 14 per cent of Eircom, which is currently worth £952 million.
The claw-back arrangement means KPN has to pay back £685 million, while Telia has to pay £460 million, giving a total of £1.1 billion.
Meanwhile, as expected, the EU Mergers Commission has sanctioned the Telia/Telenor deal.
One of the conditions is that they sell either Telenor's 49.5 per cent stake in Esat Digifone, the second mobile phone operator, or Telia's 14 per cent stake in Eircom. Although no formal decision has been made, it is believed the merged group will opt to divest itself of the Telia stake in Eircom. KPN could buy up to 8.9 per cent of the stake, but no more, as this would bring its holding beyond 29.9 per cent, meaning it would have to make an offer for Eircom's entire shareholding.
The remaining 5.1 per cent could be placed with institutions.
Industry sources pointed out that KPN would have to pay £600 million for this stake, and added to the £685 million it would have to repay the Exchequer under the claw-back, would mean a total outlay of £1.29 billion.
They said it was not at all certain that KPN would buy the 8.9 per cent stake.
Meanwhile, Telia has exited Accuris, a software development firm it established with KPN and Eircom. The company employs around 100 people and is based at East Point Business Park in Dublin. It is understood that most of the work was being carried out on behalf of KPN and Eircom.
An Eircom spokesman confirmed last night that Telia was no longer involved with Accuris. He insisted, however, that this issue and the issue of whether Telia would sell its Eircom stake were unconnected.
