AS the strategic alliance process in Telecom Eireann comes to a crunch, Mr David Begg of the Communications Workers' Union wants the employees to get a sizeable shareholding.

The Government has already indicated it is setting aside 5 per cent of the shares for employees, but Mr Begg has said he believes the employees should get at least to per cent - and be prepared to pay for it.

It has been clear for some months the CWU - which represents the bulk of Telecom workers - was looking for a shareholding of at least 19 per cent. But Mr Beggs's latest intervention is important not only because of the timing - coming as the alliance talks are due to enter their final stage - but also because the union has done considerable research on how such proposals should work.

The question now is whether the Government will run with the plan as part of the strategic alliance process. Certainly the idea of employee share ownership is one that would find favour in theory with all the Government parties, but whether they will opt for the plan on the scale suggested by Mr Begg remains unclear.

The plan being put forward by Mr Begg is based on the US employee share ownership schemes. Over 10,000 companies in the US have more than 30 per cent of their stock owned by employees and four out of seven of the major airlines are employee owned.

Such schemes involve a loan from a financial institution to an employee benefit trust, which is then used to buy a package of shares from the company. In Telecom's case the financing involved would be substantial, with to per cent of the company likely to cost over £100 million. If the union was to look for a 14 per cent shareholding (leaving the new partner with 35 per cent and the Government with 51 per cent), then the cost would be closer to £150 million.

Once bought in such a scheme, the shares are then held by the trust which uses the dividend to pay the bank loan. The shares are released in batches to a second trust as they are shared among employees.

How the employees actually pay for the shares and gain ownership of them, is then up for negotiation. Devices, such as using funds which might be paid directly to employees from a profit sharing or incentive scheme, can then be used to pay for the shares over a period of years. It would be a matter for negotiation how this would work in Telecom's case, although Mr Begg has made it clear that the employees should pay a fair value for the share stake.

The union has gone as far as to engage Wall Street investment bank Keilin and Bloom to represent it if the Government accepts the initiative. The bank works exclusively for trade unions in the US and has acted in most of the big employee buy backs on behalf of the AFL-CIO group of unions in north America.

Mr Beggs's task is to persuade - the different parties in the Telecom strategic alliance to accept his plan. For the employees, the scheme has the obvious attraction of providing a means of building a valuable shareholding over time. But the shares will have to be paid for, either through agreeing savings with the company or through diverting bonuses or salary increases.

The other big advantage is it gives employees the chance to win a boardroom seat, backed by a substantial shareholding, enabling them to attempt to monitor and influence company development. From the point of view of the Telecom workforce, the danger is that while this Government has said it will retain a majority stake, a future administration could take a different view, particularly given the large capital investment which development of the communications infrastructure demands. A seat on the board, backed by shares, could thus be a valuable commodity.

For the Government and the new strategic alliance partner - presuming there is one - the advantages of offering unions a share would be that it could assist in the negotiations on company restructuring, as well as helping to motivate the workforce. If the idea is to run, then the next move would appear to be for the Minister for Communications Mr Lowry to express support.

The Government is thought to be supportive in principle, but what about in practice?