A BASIC telephone call may eventually cost nothing, the chief executive of Telecom Eireann, Mr Alfie Kane has predicted. Pledging further price cuts by the State company, he said that within a few years most of its revenues will come from data and Internet traffic, as well as ecommerce.

Mr Kane was speaking following the publication of Telecom's 1997 results, which showed pre-tax profits up 9 per cent to £223 million. Turnover also grew strongly and the company dramatically reduced its debt by £202 million, to £175 million.

Mr Kane said that full liberalisation of the market - which will occur in December with the lifting of the derogation on residential voice telephony - will cause accelerated price reductions.

He said that five years ago Telecom's prime revenue source was from telephone calls. It accounted for 80-90 per cent of revenues, but now this figure was 60 per cent. In the next five years it would reduce to about 30 per cent, he said.

Mr Kane said that when this happened revenues would be coming from e-commerce, advertising and commercial access to information "and you as a customer might well end up not paying anything at all for your basic telephone service". Telecom's turnover increased to £1.35 billion last year, compared to £1.22 billion in 1996, driven by a record 15 per cent increase in telephone traffic.

Mr Kane said the substantial debt reduction and increased revenues meant that Telecom was now positioned to make investments overseas. He said the company could fund an investment of £200 million on its own - comprising £100 million from internal revenues and £100 million from borrowings. Mr Kane said that if Telecom invested with other partners this figure could rise. He said the company would most likely look to Eastern Europe for investments and had spent the past two years building a strong mergers and acquisitions unit to examine such opportunities.

Telecom posted after-tax profits of £155 million last year, up by £28 million compared to 1996. It also invested £297 million in its mobile and fixed networks, without recourse to borrowings. Last year Telecom also connected 204,148 customers, a record for the company.

The number of lines grew by 8 per cent and there are now 83 lines per 100 households. This figure is still well below the EU average, suggesting there is still plenty of room for competitors to attack the residential market.

Mr Kane said there was "little doubt" that Telecom would face competition on local calls, but he said there would still be a strong focus from competitors on niche markets and high density areas. Telecom's subsidiary, Eircell, also experienced strong growth last year and now has 415,000 customers, on the GSM (digital) and analogue networks. The pre-paid service attracted 100,000 customers in less than six months.

Mr Kane said mobile call charges would fall, regardless of the advent of a third operator - the third licence was recently awarded.

Telecom paid a dividend of £46 million to its shareholders - the Government (80 per cent) and the Dutch/Swedish alliance partner KPN/Telia which owns the remaining shares. This is up from £12 million last year.

Meanwhile, Mr Kane predicted that the sale of Cablelink, in which Telecom has a 75 per cent stake, should raise over £200 million.

He said it was a strong asset and forecast that at least six companies, involved in either cable television or telecommunications, would bid.