Fine Gael has stated that that the state's entire 50.1 per cent stake in Telecom Eireann (TE) should be floated on the stock market next year and that a portion of the shares should be given to Telecom's 1.1 million customers.

"Fine Gael believes that all 50.1 per cent of shares in Telecom Eireann should be sold through the IPO in the middle of 1999. Within this, at least 10 per cent of the shares should be offered to the 1.1 million Telecom customers. Half of these should be given for free and the other half should be heavily discounted," Fine Gael spokesperson on public enterprise, Mr Ivan Yates TD, stated.

The Government has recently appointed Merrill Lynch and AIB Capital Markets to advise on the flotation, but it is thought that the Government plans to sell only half of its 50.1 per cent stake and plans to hold the remaining shares for a period of years. It will be some time before the structure of the share offering is revealed, but it is expected that a portion of shares will be offered publicly, with other portions offered to Irish and international institutions.

Telecom Eireann is likely to be valued at £3 billion and the Government stake at around £1.5 billion at the time of the flotation. On this valuation, the Fine Gael proposal would mean that around £75 million worth of shares would be given free to Telecom customers with a further £75 million offered at a heavy discount.

Fine Gael said that the free share would be self-financing and has already been used in the privatisation of British utilities. "The financial institutions who would buy the remaining shares will have to build up their stake in Telecom by purchasing shares from the public through the stock exchange. This has the effect of driving up the publicly-quoted share price and thereby attaining an overall higher market value for the entire plc," said Mr Yates.

"It is vital that Irish people benefit from any potential private share windfall. Moreover, members of the public would represent a good long-term stakeholding prospect for Telecom Eireann, rather than finance companies looking for a speculative quick capital gain," he added.