Two leading semi-state companies are currently considering submissions from advertising firms for up to £12 million worth of contracts. Some of the country's best known advertising firms are vying for a share of Aer Lingus and Telecom Eireann's lucrative advertising work.

Telecom is seeking to award contracts worth in the region of £7 £8 million, while Aer Lingus will be awarding a contract estimated to be worth around £5 million a year.

It is understood that Aer Lingus is more advanced than Telecom in negotiations on contracts. For the first time it will award the contract for advertising in Ireland, Britain and continental Europe to one firm.

Three firms were invited to make presentations earlier this week. This has now been narrowed down to two, who will make further presentations. The contract should be awarded within the next three weeks.

The two firms are McConnells, the biggest advertising firm in Ireland, and Irish International. It is understood that both these firms are also in the running for work from Telecom Eireann.

Telecom is considering up to a dozen firms for various aspects of its advertising work, including above and below the line advertising. Firms in the running include Saatchi & Saatchi, Arks and Dimension.

Telecom and Aer Lingus are considered to be extremely good brand names and will represent a strong cachet for whatever firms succeed in winning the work. Telecom's spend across all media puts it in the top 10 big spenders in Ireland, along with Guinness and Procter & Gamble.

Margins for the work can vary depending on what is involved, but one source put the figure at around 12 per cent. "It is a very attractive contract," one advertising industry source said.

It is understood that the contract comes up approximately every four years. The increasing liberalisation of the telecoms market means increasing competition and increased advertising. Telecom is a substantial press advertiser, whereas Guinness would have a higher spend on television, according to industry sources. The contract does not include advertising or promotion work for Eircell, the mobile phone operator, which isalso a strong advertiser.

Meanwhile, Telecom is to announce within the next fortnight the shortlist of towns which will be in the final shake-up of the information age town competition. Following the announcement, the selection committee will visit each town, spending a day there, probably at the end of August.

The winner will be announced in mid-September. The competition is worth around £15 million. Each home will have Internet, fax, and the latest telecommunications equipment and the project will run for about five years.

In all, 51 towns entered the competition and Telecom is said to have been amazed by the response and extremely impressed by the high standard of entries.