The issuing of lucrative MMDS TV rebroadcasting licences has emerged as a central element in the latest controversy surrounding donations to Mr Ray Burke.

As the Taoiseach yesterday ordered an investigation into how the MMDS licences were allocated, it emerged that the £30,000 payment to Mr Burke from a subsidiary of Fitzwilton in June 1989 was made while applications were being considered in the Department of Communications.

Four months after the payment was made, the MMDS franchises were awarded to a wholly-owned subsidiary of Princes Holdings - Independent Wireless Cable Ltd - for the Meath, Louth, Cavan, Wicklow and Wexford areas. The company had applied at that time for 14 licences.

Princes Holdings is a joint venture between Independent Newspapers (50 per cent) and US telecommunications companies UIH and TCI. Both Independent Newspapers and Fitzwilton plc are controlled by Dr Tony O'Reilly.

In 1992, Princes Holdings acquired control of Westward Cable, which had been awarded seven licences in 1989, and of Cork Communications, which had been awarded four licences that year.

A statement from Princes Holdings Ltd last night contradicted as "incorrect" an earlier claim in the Dail by the Fine Gael leader, Mr John Bruton, that the company had been awarded 19 of the 29 MMDS licences issues in 1989.

The sequence of events leading to the awarding of the now controversial franchise stretches back to 1986 and 1987 when Department of Communications technical staff and Canadian experts went to work on a raft of plans.

At the end of 1987, the Government decided to allow the Minister for Communications, Mr Burke, to proceed with the introduction of licensing for MMDS under the Wireless Telegraphy Acts and to take action against illegal deflectors.

Applications for all "cell areas" were received by the Department of Communications by September 13th, 1988. The next year, on April 11th, officials at the Department set out the criteria used in the evaluation of applications.

The note urged that awards be based on a number of issues and should "avoid undue concentration of ownership". It also included an assessment of all the applications and recommendations for awarding the franchises.

During the special Dail debate on the latest revelations of payments to Mr Burke, the Fine Gael leader described the MMDS issue, "one of Dr O'Reilly's interests", as the source of considerable controversy in the lead-up to and in the aftermath of last June's general election.

"In the change of portfolios after the 1989 election, Mr Burke, although changing departments, retained the portfolio of Communications which was transferred from his old Department of Industry to his new Department of Justice. This was considered a most unusual combination at the time", Mr Bruton said.