Government to sell entire stake in Telecom Eireann

The Government is to sell its entire 50

The Government is to sell its entire 50.1 per cent shareholding in Telecom Eireann when the company floats on the stockmarket next month. It had originally planned to sell around 35 per cent of the group, but The Irish Times understands that it has now decided to sell the entire stake.

It has opted to do this to provide as many shares as possible for the members of the public who wish to subscribe for the offer. More than 1.2 million people have registered their interest in subscribing and many of these are now expected to apply to buy shares when the retail offer opens in the middle of this month.

The share sale will lead to a massive inflow of cash for the Exchequer. The prospectus for the company, to be published on Sunday, will indicate a price range at which the company's shares will float on the market. It is expected that the range will be wide and the exact price at which the shares will be sold will depend on the demand for shares from institutional and private investors and on conditions in the stock market at the time.

If the company's shares are sold at a price close to the top of the indicated range, then it could value Telecom at close to £7 billion (€8.8 billion). However the bottom end of the price range is likely to indicate a value less than £6 billion.

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The company's financial advisers, AIB and Merrill Lynch, will have told the Government the precise price at which they expect the shares will be sold, but this will remain a closely guarded secret until the price is set just before the shares actually float in early July.

This means that the Government is set to garner at least £3 billion from the share sale. It will get a substantial extra amount - possibly up to £1 billion - from an agreement under which KPN will increase its shareholding in Telecom.

The prospectus next Sunday will indicate that members of the public can apply for a minimum of £250 worth of shares. The maximum about they will be able to apply for is £100,000. However, those who apply for high allocations will see them scaled back substantially, despite the extra shares being sold by the Government.

The prospectus will also say that KPN, the Dutch telecoms company, will face a standstill under which it can not increase its shareholding from the 35 per cent it will hold, probably for about two years.

Meanwhile, staff at the Golden Pages have said that they plan to seek a High Court injunction on Monday in an attempt to prevent Telecom from proceeding with the flotation.

The threatened action by 163 of its staff is a last-ditch effort by them to be included in the Telecom Employee Share Option Plan (ESOP). Under the terms of the ESOP, only employees of companies which are 100 per cent-owned by Telecom qualify for share options.

As Telecom owns just 63 per cent of Golden Pages, its employees are excluded.

In a statement yesterday, a spokeswoman for the Golden Pages staff said they regretted having to take this legal action. "As Telecom Eireann continues to ignore our claim, we have no other option," she said.

A Telecom spokeswoman confirmed it had received notice of the proceedings but refused to make any further comment on the matter.

Some 20,000 staff at Telecom Eireann and subsidiaries such as Eircell, Eirpage, Indigo and LAN Communications, together with some part-time contractors, are entitled to take up share options under the terms of the flotation.

Golden Pages staff argue that they have always seen themselves as part of Telecom.

Mr Peter McDonnell, a solicitor representing the group, claimed Telecom's decision to offer staff share options to companies which are 100 per cent-owned is arbitrary and discriminatory towards Golden Pages staff.

Cliff Taylor

Cliff Taylor

Cliff Taylor is an Irish Times writer and Managing Editor