Dáil Éireann debate -
Thursday, 2 Apr 1998

Vol. 489 No. 5

Written Answers. - Employee Shareholding Schemes.

Eamon Gilmore

Question:

25 Mr. Gilmore asked the Minister for Public Enterprise the position in relation to the proposed employee share option scheme for employees of Telecom Éireann; and when it is expected that the negotiations will be concluded. [8317/98]

Minister for Public Enterprise (Mrs. O'Rourke)

As the House will be aware, I announced last week that agreement had been reached with the union coalition in Telecom Éireann on an employee share ownership scheme. The agreement follows from the commitments entered into last summer by the Taoiseach, the Tánaiste and myself.

The agreement provides that employees will pay £190 million for 9.9 per cent of the company with an additional 5 per cent acquired in return for company transformation.

The main terms of the deal are as follows: the employees are to receive a shareholding of 14.9 per cent in the company which will be transferred to an employee trust as follows: a total of 9.9 per cent of the State's shares in the company will be transferred to an employee trust from the outset, on payment to the Exchequer of the agreed price; an additional 5 per cent will be transferred to the employees on a phased basis as plans for the transformation are achieved and verified, the objective of these plans is to transform Telecom Éireann into a world class telecommunications business through cost reduction, more flexible working arrangements and improved delivery of service to customers; and an initial public offering, IPO, for the sale to the public market of a further tranche of the State's shares in the company is to take place in 1999, and details are to be decided by the Government at a later stage.

The price of the 9.9 per cent will be £190 million payable to the Exchequer by an employee share ownership trust. The trust will source its funds as follows: First, the company has agreed to make a contribution to the employee trust of £100 million which the company is satisfied represents fair value for revised work arrangements and pension arrangements. As part of its contribution to the deal, the employees will now introduce new agreed working arrangements and pay 5.3 per cent of salary as an employee contribution to the pension fund. At present, the company makes the full contribution. A total of £60 million will be raised by the trust by way of commercial loan. The trust will make a final payment of £30 million on a basis which will be without recourse to the company or the State and will take place one year after the 1999 IPO date. If the market value of the company is less than £2 billion at the time of the IPO but more than £1.6 billion, the final payment will be reduced on apro-rata basis. No final payment will arise if the market value is £1.6 billion or less. Final payment will be secured against an appropriate percentage of the shares held in the trust. The trust will receive dividends and voting rights on 9.9 per cent from the outset and on the 5 per cent as ownership is transferred.

The next step is to transform last week's deal into a formal legal agreement between my Department, the Strategic Partners KPN/Telia, the company and the union coalition representing the employees.

This is an important and innovative deal, fully in line with the spirit of Partnership 2000 and in accordance with the Government's Action Programme for the Millennium. It gives the employees in Telecom Éireann an important stake in the future of their company. Telecom Éireann is now well positioned to take advantage of the many opportunities presented by the expansion of the telecommunications sector in the evolving information society.