Sharp differences still exist between television cable operators and the Office of the Director of Telecommunications over the terms of new licences, just days before the deadline set for final agreement. The regulator, Ms Etain Doyle, has set next Monday as the deadline for acceptance of the terms by the industry.

It is understood that the operators are still deeply unhappy with some of the terms on offer - they are being asked to surrender their existing licences in return for new ones - and are shocked that the regulator is demanding a 3.5 per cent levy on the licence fees they charge to customers for basic and premium services.

Acceptance of the new licences is vital if the State is to sell off Cablelink, owned jointly by Telecom Eireann and RTE. There is still a possibility that the issue of the new licences could become embroiled in legal actions, which would completely derail the planned sell-off of Cablelink, a vital precursor to the £1 billion flotation of Telecom Eireann in June. The timetable for Cablelink's sale has already been put back several months.

Relations between the regulator and the cable companies remain tense and it is understood that the companies are consulting today with their legal advisers. It is thought that the companies are anxious to avoid the legal route.

In a document issued on December 23rd, Ms Doyle said that if the operators did not indicate their willingness to surrender the existing licences in favour of the draft regulations, she would "initiate or continue as appropriate in each case, legal action to establish what rights, if any, existing licensees have" regarding exclusivity or renewal of licences. Another key concern of the operators is the fact that the new licences do not offer them what is known as a "return path", best facilitated by an allocation of radio spectrum. The return path is essential for the provision of interactive multimedia services such as home shopping and video on demand. Not getting this now casts doubts over the viability of investment plans because it is seen as a key source of revenue in future years, according to sources.

The issue of a return path will be addressed when radio spectrum is awarded in mid-year, according to sources. They say not all cable companies are guaranteed radio spectrum because it is such a scarce resource.

Under the terms of the licences, operators would be offered exclusivity on their particular platforms for five years only. The licences would be granted for 15 years.

The issue of illegal deflectors also remains contentious, with the operators objecting to any short-term licensing of these companies.