Esat Digifone will require £187 million for the development of its mobile phone network and £75 million of this will have to come from the company's shareholders - Esat Telecom, Telenor and Mr Dermot Desmond's International Investment & Underwriting, writes Brendan McGrath.

Details of the cost of setting up the network are disclosed in the prospectus accompanying this week's $35 million (£24 million) bond issue by Esat Telecom. The prospectus states that Esat Digifone completed a £112 million debt finance package with AIB and ABN-AMRO in June, but that the balance of the £187 million will have to come from Esat Digifone shareholders in proportion to their shareholdings in the mobile phone company.

Esat Telecom and Telenor both have 45 per cent of Esat Digifone with IIU holding 10 per cent. This week, it was disclosed that Esat Telecom and Telenor had paid a total of £5.8 million to IIU for half of the stake held by the Desmond investment company.

The terms of the debt finance package with the banks require that Esat Digifone's debt/equity ratio must not exceed 150 per cent. This means that the shareholders will have to make capital contributions to Esat Digifone before the drawdown of bank funding, the prospectus states.

The finance facility also prohibits the payment of any dividends to the Esat Digifone shareholders until 2002.