The Government regards Telecom Eireann's 75 per cent stake in Cablelink as untenable and is likely to order the company to divest, the Minister for Public Enterprise, Ms O'Rourke, has said. The Minister said she would begin an intensive round of discussions with the two firms and their employees, as well as with RTE, which holds the remaining 25 per cent of the cable operator.

Telecom Eireann has already sent the Government a report outlining a number of possible directions. These are believed to include the sale of some or all of the stake, or a partnership with another company which would run Cablelink at arm's length.

"I'm strongly of the viewpoint that there has to be some divestment because clearly the full rigour of competition is not evident in this area," Ms O'Rourke told RTE News yesterday.

The question of whether Telecom Eireann should sell its stake in Cablelink has become more urgent in recent years; technological developments now mean that a modern cable company could offer voice and data connections to customers, competing directly with the telephone company.

Cable companies around the world say they will wrest most Internet access business from telephone companies over the next few years, giving customers connection speeds 10 times faster than most modems can offer.

Cablelink has some 340,000 subscribers, mostly in the Dublin area. Analysts say the company has been allowed to fall behind technologically, and would need an investment of £150 million to bring it up to date.

Questioned about the report from Telecom, Ms O'Rourke replied: "The report is only, literally, being studied by me just now, but my clear-cut idea, looking at it without having talked in detail to all of the various interested people working in it and managing it and the board, is that the position, as it is, is not tenable any longer, and therefore it is a matter of decision-making as to how one approaches the matter."

She said she had already arranged meetings with the chairman, staff and management of Telecom Eireann for an intensive round of discussions.

Although the Minister mentioned no time frame within which decisions would be made, industry analysts pointed to the fact that RTE has an option to sell its 25 per cent share in Cablelink this June.

Although the station is believed to want to keep its stake, the Government could force it to sell as part of a privatisation deal.