The EU now looks unlikely to force Telecom Eireann to sell its majority shareholding in Cablelink, the television cable operators. This follows an EU-wide investigation into the matter. However, the European Commission has warned that state telecoms companies could still be forced to divest their shareholdings in cable firms, if they abuse competition rules.

There has been mounting criticism, not just in Ireland, but in other EU countries, of companies such as Telecom, which are in a dominant position in the cable industry. Telecom has been accused of retaining its 75 per cent stake purely as a defensive measure. Earlier this year, the Commission commenced two studies into the issue of state telecoms operators which also own cable firms. The studies found that in most EU countries where there is cross-ownership, development of cable services, such as pay per view and high speed Internet services, has been held back.

Yesterday the Commission said it is necessary legally to separate cable operators from telecommunications ventures. It also said that the current accounting separation is obviously not sufficient. It is proposing to ensure further separation, which will allow the Commission to take steps to "establish or re-establish competition" in areas where it feels firms benefit from special rights or a monopoly position.

The Commission also warned that it could still oblige a telecommunications company "to simply abandon its cable activities", if it feels it is abusing competition or merger legislation. The Commission is to publish its final legal position in two months.

"The development of the telecommunications and multimedia markets depends on four factors: service competition, infrastructure competition and infrastructure upgrade, as well as other types of innovation," the Commission said.

"The joint provision of telecommunications and cable TV networks by former monopolies can stifle the development of telecom and multimedia applications."

Telecom has been conducting a strategic review of Cablelink and it is believed that this review is almost complete. Telecom's chief executive, Mr Alfie Kane, has previously stated that the development of Cablelink should provide a full multimedia platform which would be open to users other than Telecom.