ESB Telecom, a wholly owned subsidiary of the State electricity company, has signed its first three contracts with telecoms firms that want to use its new national fibre optic network.

The company also recently signed 26 licences with the mobile phone firm Hutchison, which wants to use ESB towers and sites to help the construction of its mobile network.

Mr John McSweeney, general manager IT solutions and telecoms at ESB, said the telecoms subsidiary planned to generate annual revenues worth about €20 million within three to five years.

In an interview with The Irish Times yesterday, Mr McSweeney confirmed ESB Telecoms had signed a capacity deal with Smart Telecom, which would enable it to offer telecoms services throughout the State.

It is understood the two other telecoms capacity contracts are with fixed-wireless access companies Irish Broadband and Dundalk-based Digiweb.

Mr McSweeney said the ESB had received 50 enquiries from firms interested in buying capacity on the ESB's national fibre backbone network, which was switched on earlier this week by the Minister for Communications, Mr Ahern.

ESB Telecom operates as a "carriers carrier", which means it supplies wholesale capacity to other operators. Its €50 million network links Dublin to Limerick, through Cork and Waterford, Dundalk, Sligo and Galway back to Dublin, with a spur line linking Letterkenny and Buncrana.

Mr McSweeney said the new 1,300 km network was already changing the price structure of Irish telecommunications.

"We are offering pricing that doesn't depend on geographical distances, rather it is based on capacity and bandwidth. This should remove the digital divide and if there is latent demand for broadband it will bring it out."

He said ESB Telecom would not seek to enter the retail telecoms market but would concentrate on the wholesale market. It is already seeking partnerships with operators such as NTL, Colt and Cable & Wireless, which would bring them to the regions.

He said the firm would compete for any Government business if it was put out to tender following an ongoing review by the Department of Finance. But he said the Government should not try to appropriate its national network and link it to the publicly funded metropolitan networks.

The ability to co-operate with other firms was an extremely important element of the ESB's telecoms strategy. ESB Telecom may also build or buy a new data centre for its telecoms arm, if the business climate improves.

The ESB recently outsourced some of its IT systems to data centre operator Telecity for the first time. It also has its own internet data centre in its headquarter in Dublin city centre.

ESB Telecoms employs about 200 staff, the majority of which work to provide communications for ESB's electricity arm. It has a staff of 32 which are working on its national network.