THE Government has formally begun the process which will lead to the partial privatisation of Telecom Eireann. Announcing the formal start of the process yesterday the Minister for Transport, Energy and Communications, Mr Lowry said that £220 million from the proceed of the sale will go to Telecom
It is understood that the Government expects to raise between £400 million and £500 million from the sale of a 35 per cent stake in Telecom.
The remainder of the proceeds are expected to offset the exchequer's estimated £250 million liability to Telecom Eireann's pension fund.
After a lengthy delay, the Government parties have agreed the information memorandum which will be sent to each of the companies interested in forming a strategic alliance with Telecom.
According to the Department of transport, Energy and Communications, the memorandum "sets out detailed information on the company, its performance, future prospects and the Government's policy and regulatory proposals for the future development of the telecommunications sector".
This is the financial equivalent of the Government "setting out Telecom's stall".
The information will be sent to six companies: British Telecom, the US-based Bell Atlantic, the European consortium Unisource Tele Danmark, Singapore Telecom and the Californian company, Airtouch.
Airtouch's interest is limited to an alliance with Eircell, Telecom mobile phone subsidiary.
Telecom's partner will take a 35 per cent stake in the company. A further 5 per cent will be set aside for an employee shareholding scheme. The process is expected to be completed by the end of next summer.
In a statement yesterday, the Government said that the successful partner to Telecom will have to:
(1) assist Telecom to meet its customers' international needs, particularly those of multinational companies based in Ireland.
(2) Assist in growing new and advanced services in Ireland and expand the penetration of phones in the domestic and small business sector.
(3) Accelerate the growth of the company's mobile phones business.
(4) Restructure the cable TV business and develop it into an open multi-media platform for all service providers.
(5) Provide key support through technical know-how, key personnel and business skills.
Whether the Government will favour one broad alliance or a number of smaller alliances involving Telecom's subsidiaries is one of the key elements of the information memorandum, according to sources close to the potential partners.
It is understood that the Government favours one broad alliance. Following this alliance, however, the reconstituted Telecom Eireann may then decide to find partners for Eircell and for Telecom's cable-TV subsidiary, Cablelink.
Industry sources said last night that another of the key issues to be addressed by the memorandum is the total number of redundancies required at the semi-state company.
Telecom's chief executive, Mr Alfie Kane, has already said that the company needs to cut its 12,000 staff by 2,000 in addition to targeted cost-reductions in other areas.
"It is inevitable that we will have to have rationalisation and that jobs will be lost," Mr Lowry said last night. "Our priority is to ensure that the maximum number of jobs are protected and that the new partner brings with it new job opportunities," he said.
It is understood that the information memorandum was only agreed at a meeting between the leaders of the Government parties yesterday morning.
The Government has also agreed on the heads of a Bill which will allow the strategic alliance to proceed. Further legislation to update the Telecommunications Acts and establish a multi-sectoral independent regulatory body will be drafted next year.