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Dáil Éireann debate -
Thursday, 18 Feb 1999

Vol. 500 No. 6

Postal and Telecommunications Services (Amendment) Bill, 1998: Second Stage.

I move: "That the Bill be now read a Second Time."

The purpose of this Bill is to amend the legislation governing Telecom Éireann to facilitate an initial public offering of shares in the company and to make legislation pertaining to the company compatible with its subsequent status as a publicly quoted company. Before outlining the provisions of the Bill, I would like to provide some background to the present position in order that the significance of these proposals may be fully appreciated.

For millennia, human communication could only go as fast as the fleetest runner, the swiftest horse or the fastest ship. As we approach the new millennium, we can now send messages to each other literally at the speed of light along fibre optic cables or via radio signals which can be relayed around the planet in a matter of moments by satellite.

Developments in telecommunications in the past 160 years have been truly amazing. The telegraph system, developed in the 1830s, was introduced to Ireland in the 1850s. The first services were established by private companies such as the private railway companies. In 1869, however, as the magnitude of linking the whole country to the telegraph system became apparent, the Government stepped in and nationalised the telegraphs system. Through the office of The Postmaster General, and later through the Department of Posts and Telegraphs of the Irish State, the State retained control of this essential means of communication.

The first major change took place in 1984 when, almost at the dawn of the new information age, Telecom Éireann was established as a State-owned company to take over the running of the telecommunications system. The company has since established a world class communications infrastructure and service in Ireland. Some 150 years after the development of the first telegraph companies in Ireland, I am happy to present this Bill aimed at facilitating the proposed initial public offering of the State's shares in the company.

Government strategy in regard to the telecommunications sector over recent years has been focused very much on the introduction of strong and effective competition in the marketplace. One of the main planks of this strategy has been the introduction of an equitable and transparent regulatory regime. This has been effected through the transposition of relevant EU Directives into law and the setting up of the independent office of the Director of Telecommunications Regulation. I pay tribute to the previous Government for setting up the office, the director of which, Ms Etain Doyle, has worked extraordinarily diligently.

The development of Telecom Éireann commenced with a strategic alliance with Comsource, involving KPN of the Netherlands and Telia of Sweden, which initially entailed selling 20 per cent of the Government's shareholding in the company. The objective of this agreement was to provide a vital cash injection to the company which had, at that time, a substantial amount of debt to deal with – more than £1.2 billion – and to provide access to the expertise necessary for the company to deal with the impact of forth coming competition. The deal proved to be a turning point for the company. It made considerable progress in restructuring its costs and tariffs and in introducing substantial reductions in many of its charges to its customers over the past two years. More are expected over the coming year.

Telecom Éireann has also been able to make major strides technologically and is now capable of providing the full range of services to its customers, including the largescale multinational information and communication technology companies. The second part of the development process within Telecom Éireann entailed involving the workforce in the whole process of change within the company. The agreement of the employee share option plan between the company and the unions, which was my achievement, is now being finalised and involves the sale of 9.9 per cent of the company to the employees for £190 million with an additional 5 per cent being transferred to the employees. This is in return for an agreement on company transformation including specific measures relating to changes in work practices and staff numbers.

In the past the most widespread organisational structure for telecommunications was an integrated State owned monopoly such as Telecom Éireann. The company operated solely in the home market and was given the task of providing essential services to the State where the provision of such services would not have been economically attractive to the private sector.

Now new service providers have the technical and economic means to compete against the public telecommunications operator. The globalisation of businesses requires advanced international services and the growing demand for telecommunications services requires speedy responses to meet customer needs. The Government believes these needs are best met by a vibrant competitive and fully liberalised market in which Telecom Éireann will continue to play a major part. As for the company, it no longer needs or wants the protection of the State and can only achieve its commercial mandate by being able to operate freely in pursuance of its own commercial strategic goals.

Similar positions were taken in regard to and by former national telecommunications operators in other countries with liberalised markets and which see the need to operate in a fully commercial environment. There is an international trend evident with a number of high profile divestments of State shareholdings in companies such as France Telecom in France and Swisscom in Switzerland. However, it is very much because of the circumstances prevailing in Ireland that the Government agreed to conduct this initial public offering of shares in the company. It is not simply because we wish to follow blindly the current international trends.

The Government has agreed particular objectives for the initial public offering of shares in Telecom Éireann. These comprise maximising the proceeds to be returned to the Exchequer, ensuring a successful initial public offering, promoting wider share ownership and ensuring value for money on expenditure related to the sale.

In terms of maximisation of the proceeds of the sale and subject to market volatility, the market trends for telecommunications shares are now quite favourable. They recovered well from fluctuations and investor uncertainty evident in world equity markets prior to last Christmas. While European telecommunications shares were not immune to this volatility, they consistently outperformed equity markets in general and each of the flotations I mentioned earlier were oversubscribed.

The power of telecommunications shares to withstand even the most volatile of market environments was evident recently. Following the fall in the market as a result of the Brazilian devaluation, the merger between AirTouch of the United States and Vodafone from the UK, which created the world's largest mobile phone consortium, sparked tremendous activity in world markets. The amount of money due to the Exchequer from the proceeds of the sale cannot be stated with any degree of certainty. The decision as to what to do with the proceeds of the sale is ultimately for the Government to make.

The question of the price has been and continues to be a major consideration in the offering of Telecom Éireann shares. I know my advisers are following the market trends closely so that we have the best advice available at the time when the price range needs to be set.

Questions also arise as to what proportion of the shares will be divested in the IPO process and what proportion, if any, is to be retained by Government and for how long. As some of you no doubt will be aware, the net result of the strategic alliance and the employee share option deal has meant the Government's shareholding in the company will be reduced to 65.1 per cent. As part of the agreement with the strategic partners, KPN/Telia has the option of buying a further 15 per cent of the Government's shares. This option comes into effect later this year and, if they choose to exercise it, the amount of shares held by the State would come to 50.1 per cent. The purpose of this Bill, which has been approved by Government, is partly to allow for the reduction of the State's shareholding below the 50 per cent level.

The final decision on the precise size of the offer will be one which will be taken in consultation with my Government colleagues closer to the time of the offer and will depend largely on equity market conditions. Likewise, the issue of what proportion of shares will be retained by Government and for how long will also be taken by Government.

One of our stated objectives of the IPO is that it should promote wider share ownership. However, I expect there will be a significant tranche of the shares available to the citizens. It is a personal objective of mine, and I know Government and Opposition colleagues are at one on this, that the Irish people should be a significant beneficiary of this flotation. It is, after all, they who have contributed so much to the company's development and success over the years, as is the case with other State companies.

The contribution of the people in reality covers the entire history of the organisation from when it was part of a Government Department, funded by tax revenues, with the task of providing vital telecommunications services on a nationwide basis to the public and to industry. Telecom Éireann has now developed into a high value player in the world telecommunications market and it is only appropriate that the public reaps the benefits of this success. The main benefit, as I see it, is the opportunity for the public to be part of the future of the company, to be able to share in its successes and to have a say in its development over the coming years. This is the essence of what being a public company means; a company which is literally owned by the people through the widest possible share ownership.

Nonetheless, the proportion of shares available to the citizens needs to be balanced by the availability of shares to institutional investors who are so important to the success of any public flotation. While the benefits to the citizens are uppermost in my mind, I am fully aware that these will only be maximised if the institutional investors are allowed to participate in a way that creates a positive trading environment. Having a number of good quality institutional investors holding significant shares in the company is desirable.

The plan at this stage is to opt for flotation on the Dublin, London and New York Stock Exchanges. While Dublin and London were to a large degree self-selecting, the choice of New York is seen as a reflection of the level of interest that prevails in the US in Irish companies. The decision is also a mark of the confidence the Government and the advisers have in the market potential of the company and the move will undoubtedly act as a stimulus to the ultimate success of the IPO.

One of the issues I had to address in preparing the company for an initial public offering was that of corporate governance, in particular, the composition of the board. Following advice from the Department's advisers, Merrill Lynch and AIB Capital Markets, I met each of the ministerially appointed directors and outlined the position with regard to the IPO. Four of the board members agreed voluntarily to relinquish their positions as directors and their understanding of my wish to effect pre-IPO changes at board level was very much appreciated by me and by the Government.

I state clearly and without equivocation how much I value the contribution made to the company by those who chose to relinquish their board directorships. My request to them should not be taken as reflecting negatively on their perform ance or their ability. On the contrary, Mr. Ron Bolger has been a distinguished chairman and has guided the company with great skill and professionalism through an era when the company's value and turnover has increased substantially. I am glad he agreed to remain on the board in his new role as deputy chairman where his knowledge of the company and of the Irish telecommunications sector will be of undoubted assistance.

I also extend my deepest gratitude to those other board members, Maurice Doyle, Evanne Kilmurray, Marie Hurley and Gerry Wrixton, each of whom played his or her part in the transformation of the company in recent years. I very much appreciate the manner in which they responded to my request and I acknowledge their public spiritedness and their commitment.

I was very pleased that Brian Thompson agreed to become the new chairman of the board. Allied to his wide business experience in the very competitive United States telecommunications sector, his commitment to Ireland and his expertise in Irish affairs gained through his work on the Ireland-America Economic Advisory Board and the Advisory Committee on Telecommunications made Brian Thompson a very suitable candidate for the job. The other new directors appointed by me are Mr. Ray McSharry and Mr. Jim Flavin, both of whom have experience as directors of boards of publicly listed companies. I know they will bring their expertise to bear in their role in Telecom Éireann and I wish them well.

Before discussing the substance of the Bill, I will briefly refer to the various discussions that have been a necessary part of the whole IPO process. Participants in these discussions include various Departments, the company, the strategic partners, KPN and Telia, the unions and the former workers of Telecom Éireann. I wish to avail of this opportunity to thank each of the groups involved for their positive contribution which has ensured the success of the whole consultation process to date and I look forward to a continuation of it in the future.

The provisions of the Bill may be grouped into four broad categories. The first of these concerns those provisions needed to permit the initial public offering of shares in the company. This includes providing a mechanism whereby the expenses of the process may be paid. In this instance, it is proposed that this should be done by way of moneys voted by the Oireachtas to the annual Vote of my Department.

A further provision in this category is set out in section 8. The purpose of this provision is one of clarification. The first part clarifies the provision in section 9 of the Telecommunications (Miscellaneous Provisions) Act, 1996 which concerns the Minister's powers to enter into agreements for the sale and/or issue of equity in the company and the scope of such agreements. The second part of this provision confirms the non-application of section 60 of the Companies Act, 1963 to certain specific arrangements involving the company. The existing exemption from this section was given to Telecom Éireann in the 1996 Act in the context of the strategic alliance. The purpose of the proposed amendment in the Bill is to extend the exemption to cover other share transactions by the company's shareholders pursuant to agreements entered into by the Ministers for Finance and Public Enterprise, including the ESOP agreement.

The second broad category relates to matters of concern to the employees of the company and is mainly covered by sections 4 and 5 of the Bill. Section 4 is concerned with the superannuation entitlements of Telecom Éireann staff who were former employees of the Department of Posts and Telegraphs. It provides that the superannuation entitlements of such staff in the company are maintained at a level at least equal to that which they enjoyed immediately before the vesting day of the company on 1 January 1984. The provision also makes clear that this applies equally to those staff of the Department of Posts and Telegraphs who retired or the beneficiaries of those who died before the vesting day.

Section 5 removes Telecom Éireann from the scope of the Worker Participation (State Enterprises) Acts, on the basis that such obligations are inconsistent with it being a publicly quoted company.

Following the change in the status of the company, therefore, and as is the case with such companies, its board membership will be determined largely by the size of shareholding. Before this change happens, however, there will be an interim period and the Bill seeks to cater for this by providing that the present worker directors and their alternates are to remain in office until the appointment of the new board of the company. To accommodate this the Bill gives the Minister the power to specify by order the date on which their term of office ends. I am considering this issue at present and will consult with my Cabinet colleagues. I have also met with representatives of the Irish Congress of Trades Unions and I have spoken with them about this issue on a general level. I have also met, and will continue to meet, with representatives of the Communications Workers Union on this issue.

The third broad category dealt with in the Bill concerns the repeal or limiting of certain existing provisions so that Telecom Éireann is put on an equal footing with other operators in the telecommunications sector. These include provisions which, for example, currently give the company power to prosecute various offences, for instance under the Telegraphs Acts. No other telecommunications operator in Ireland or publicly quoted company is empowered in this way and in the light of its imminent change of status such powers are now inappropriate to Telecom Éireann.

The power of the Minister to issue policy directions is also seen as inappropriate to a company with an obligation to its shareholders to pursue a commercial mandate. This power, which will put me in my box—

Dr. Upton

That is impossible.

—is to be strictly limited to issuing directions for purposes of interception of messages under the Interception of Postal Packets and Telecommunications Messages Act, 1993. I do not think I ever invoked this. It is the intention that this will be extended to other operators in the sector as appropriate.

Linked closely to this third category is the fourth and final broad set of provisions. This is required to ensure the company operates on much the same basis as not just other telecommunications companies, but other publicly quoted companies operating under the Companies Acts. In line with this I have included section 3 of the Bill under this heading. This section repeals certain parts of section 46 of the 1983 Act relating to the company's obligations regarding the superannuation schemes that it establishes, such as the requirement for ministerial approval of such schemes.

As well as the various parts of section 46 put forward for repeal in section 3, those subsections which concern the Minister for Finance's contributions to superannuation schemes covering former employees of the Department of Posts and Telegraphs are also identified for the purpose of repeal in the Second Schedule. These provisions, however, will only be repealed when the Minister for Finance decides to discharge his liability in this regard and the decision on this issue rests fully with the Minister for Finance in consultation with the Government.

To a great extent the remainder of this category comprises the repeal of various existing provisions as identified in the Schedules to the Bill. The provisions being repealed are seen as inconsistent with the proposed new status of the company. They cover issues that would normally be dealt with under the Companies Acts or in the memorandum and articles of association of a company such as those in relation to loans which the company might wish to take out and their borrowing limits.

As regards commencement of the Act, section 9 provides that the Minister may by order bring different provisions of the Act into force at different times. The timing of the orders will to a large extent be dependent on the progress achieved on the various elements of the IPO process that I have touched upon.

I have outlined the background and the main provisions of the Bill. The Government sees the completion of the IPO process and the transformation of Telecom Éireann into a commercially driven, publicly quoted telecoms operator as a major milestone in the achievement of a competitive, high-quality and customer focused market in telecommunications in Ireland. The importance for Ireland's global competitiveness in achieving this goal simply cannot be stressed strongly enough.

Before concluding, and as is proper when a Bill of real importance is before the House, I wish to thank the workers who, since the foundation of the State and beforehand, have worked in the telecoms industry at a time when it was largely a mystery to all of us. Those public spirited and public minded employees worked faithfully in the Department of Posts and Telegraphs and then Telecom Éireann. Without doubt they gave the company the performance and status it has and dedicated their lives to working in it. I also thank the Ministers from various parties who over the years had responsibility in this area for the public minded way in which they attended to their public duties without fail or exception. Many of them did so through difficult times. I also thank the members of the boards down through the years who gave of their time in a very civic minded way so that this company continues to be a backbone for the country. At a time like this we should remember those who have passed on from their duties and who took their duties so seriously pro bono publico.

I join the Minister in paying tribute to those whom she mentioned. Since 1984 in particular, when the Department of Post and Telegraphs became An Post and Telecom Éireann, the culture change, financial performance and commercial strategy of Telecom Éireann have been very effective and huge efficiencies have been gained. In moving from a culture of protectionism to competition, enormous credit is due to those who led and brought about change.

We will not oppose this Bill but there are a number of aspects of telecommunications, the IPO and Telecom Éireann with which I wish to deal. Telecommunications is a growth industry. Global communications are changing, which makes it very exciting. With charges dropping, the picture seems positive. I would like, however, to put that in a different context. Given that the rate of change among our competitors, not only in Europe but in the Far East and South America, is so rapid, how are we doing relatively, not compared to five years ago? The future wave of job creation will not be in our traditional industries of engineering, manufacturing, food and clothing, but in telecommunications, including teleservices, call centres, computer age companies, software and so on. Unless we have the infrastructure in terms of broad band capacity and cost competitiveness we will lose out very rapidly in this regard.

I highlight the decision of Microsoft not to come to Ireland as a very serious indictment of the infrastructure here, particularly the lack of effective telecommunications infrastructure. The Forfás and IBEC reports on this matter showed that there were serious defects in terms of broad band capacity. In terms of the infrastructure deficit, one of the key areas in which we must invest is the provision, nationally and regionally, of a modern telecommunications fibre optic cable network which will give broad band capacity to users.

The Minister made a jocose reference to directives which she can no longer issue. Before that becomes the case. I ask her to issue two directives.

I did not mean to be jocose.

There is nothing wrong with being jocose. Telecom Éireann requires direction on two specific points, and I will not labour them. About two and a half years ago Telecom Éireann published a customer charter setting out a series of commitments to service, including rebates to people and so on. That charter has not been properly implemented and many rebates have not been claimed as many people were not aware of it. While it is still within the Minister's domain, I would like her to issue a directive that Telecom Éireann's charter, which is not a governmental one, is implemented. The charter guarantees appointment times within 12 months and states that rebates claimed by individuals will be provided, but only a tiny percentage of customers have sought this.

There is a second area in which I would like the Minister to issue a directive, and these matters directly pertain to Telecom Éireann. Telecom Éireann had an information age competition called IAT which had a budget of £30 million. The winning town, Ennis, was allocated its £15 million. There was a proposal that the runners up, Kilkenny, Castlebar and Killarney, would get £1 million each, which I believe has been provided. However, £12 million remained to be spent on another 47 towns which entered the competition, but this has not been honoured. Before we enter the great new world of competition, I would like whatever commitments Telecom Éireann has made to be honoured in the lifetime of its State ownership of 50.1 per cent. A community Internet access centre, known as a CICA, was to be provided in each of those 47 towns, but this has not been done. Telecom Éireann has been very nebulous and vague in this regard. I would like to see a set timetable for that to be done.

I will deal with the general issues of cost competitiveness and infrastructure before going on to the Bill itself. While progress has been made, I remain deeply unhappy about the cost competitiveness of Ireland versus the UK in relation to telecommunications charges. The National Competitiveness Council, a State organisation, showed that costs here are twice those in the UK. It is a staggering problem. There are two benchmarks – one is comparison with the UK and the other is the EU average. They are reasonable benchmarks because one could say that in a particular Scandinavian country lease lines are much more expensive. The UK and a European average are important. The European average takes account of all the humps and hollows while the UK, our nearest competitor, accounts for 30 per cent of our trade and, therefore, is the most important country to monitor.

If one looks at the cost of a peak time local call for three minutes in Ireland, it is still above the EU average. This is a vital cost yardstick for Internet usage. Trunk calls in some cases are four times more expensive here than in some European countries. If one looks at the two megabyte lease line charges, ours are among the highest in Europe, notwithstanding the decreases which recently took place, and are over 50 per cent higher than in the UK. These are very significant cost penalties. I am talking about Internet access charges based on 20 hours per month on line telephone rates. If one looks at the wider OECD picture, including Japan, the United States and so on, costs here are still vastly more expensive.

Although I see press releases from Telecom Éireann saying charges are down, it does not present the relative imbalance in charges. As a macro economic developmental engine of growth for the Irish economy, we must be very tough on this. I would like to see pressure and exhortation from Government to ensure we are more competitive in this area.

Infrastructure is a direct matter for Government. It has been estimated that an additional £500 million is required. Forfás estimated that by the year 2010, an extra 40,000 jobs could be created if this infrastructure is put in place. We are talking about the difference between the current capacity, be it in Athlone or Enniscorthy. If one has broad band capacity, one can do website hosting, video conferencing, allow corporate networks into their global facilities and connect to worldwide operations. One goes from two megabytes to 100 megabytes or somewhere in between. Countries like Singapore are building multimedia super corridors to provide this. When one sees Apple, Fruit of the Loom and Krups moving out of Ireland, one reason is labour cost but the other is telecommunications costs and access to these facilities. Low labour cost destinations did not have the infrastructure before. Although they had cheap scab labour, they no longer have the impediment to investment because of a lack of infrastructure. They have sorted that out and can, therefore, work on their labour cost advantage.

In the next round of EU funds which are coming up for negotiation, post the 1994-99 tranche, this is a critical issue for which the Minister must win support in terms of developing the country. In effect 80 per cent of the Irish Internet market consists of wholly owned companies of An Post and Telecom Éireann. As the Minister is a shareholder, I would like to see greater competition and a more robust approach because that in itself might reduce charges. Specifically, a target should be set over a two to three year period to substantially reduce charges, focusing on certain ones. There should be a substantial reduction over two or three years. Within three years 90 per cent of all businesses and within five years 90 per cent of all homes should have access to broadband ser vices. To allow people work from home, there is a need for interactive facilities. We are depending on whoever buys Cablelink to put the necessary infrastructure in place in Dublin. Apart from transport costs and lack of access to airports, this will place regional areas at a huge disadvantage. Without the necessary fibre optic cable, industry will remain in Dublin, adding to the problems of traffic congestion and housing. The plans of Telecom Éireann and Esat Digifone fall far short of what is required. When I raised with Telecom Éireann the criticisms expressed in the Forfás and IBEC reports, its response was that it provides a service on request. This is like asking an industrialist to enter a greenfield site rather than an advance factory.

In recent years there has been much talk about ADSL, a new way of using copper connections cheaply, instead of laying fibre optic cable. How can this be used to meet broadband capacity requirements?

There should be an all island tariff for telephone calls. All telephone calls should be charged at the local rate. With the assistance of the regulator, there should be a move towards a revised tariff structure over five or six years to promote all island economic development. In the next round of Structural Funds a minimum of £250 million will be required for investment.

I disagree with the Minister on the way in which the IPO is being handled. I understand she is awaiting the recommendations of the AIB and Merrill Lynch whom she has appointed to handle the matter. The Exchequer has invested heavily in what is a public asset and there are key questions to be addressed. The Minister proposes to float the shares in Dublin, London and so on. I have been advised by stockbrokers that it would be a clever move to create a retail dynamic to drive up the price. By giving the public shares, as opposed to allowing financial institutions purchase blocks of 10 per cent or 15 per cent, one creates tradeability. That is the UK experience. The way to do it is to give the public shares free or at a discount rate. Institutions would then have to buy the shares and in the process drive the price up. The process would be self-financing.

Between 10 per cent and 20 per cent of the shares should be given to the public free or at a discount rate. The customer has paid for the success of Telecom Eireann by paying over the odds for telecommunication services. There are 1.1 million customers and 1.4 million telephone lines. One hundred shares could be allocated, half to be given free and half at a discount rate. If the shares floated at £3.50 and increased to £7 within one year, who would stand to make money? An operator in New York would make a killing and have a windfall.

Fat and greasy.

The public has had to endure a substandard and costly service for the past 40 years. It should have a slice of the action. Merrill Lynch and the AIB cannot deal with this issue. The Minister claimed credit for ESOP, she should now take the process a step further. When shares were handled in this way in the United Kingdom a much higher price was obtained. The NCB has put a total sale value of £3 billion on Telecom Éireann.

The Minister sits down at the Cabinet table with the Minister for Finance, Deputy McCreevy, every Tuesday at 11 a.m.—

At 10.30 a.m.

Perhaps the programme managers and party leaders do not have to meet beforehand, although one does not know what will happen in the near future.

That is an interesting revelation.

There are ten commercial semi-State companies within the Minister's ambit which could be totally or partially sold. A sum of £600 million is required for investment in the rail network, a problem about which I will badger the Minister. This morning the committee of which I am a member met the Dublin Transport Authority. The need for transport infrastructure, be it Luas or rail and bus services, is established but it will be costly. Arthur Anderson is examining how Luas should be paid for. The initial allocation has been reallocated. It is in the public interest that one asset be replaced with another in which the private sector will not invest. The proceeds raised from the privatisation of Telecom Éireann should remain in the Department to meet an acknowledged need instead of being paid to the Exchequer.

It was DOPE until I came in.

The Minister christened it DOPE, it used to be DTEC. There will be less European resources because of regionalisation and Dublin will be excluded from EU funds. How are we to finance the huge capital transport needs? This is a big headache which will not be handled through the public capital programme or by giving an extra £120 million per year over ten years. We need a new approach and the Minister should go to the Minister for Finance and the Taoiseach and state that we need to earmark proceeds from the sale of her Department's assets for once-off, historic expenditure on transport. If she does so, she will go down in transport history as making a serious commitment to resolving commuter needs and providing a better quality of life.

I will have solved all the Deputy's problems if he comes into office. He will not have to look for cash.

This approach is essential. I will now address a more unpleasant matter, namely, the removal of members from the board of Telecom Éireann. I have tabled a Priority Question on this matter today and have asked previous questions in the House on this matter. I accept that the consultants advised the Minister it was necessary to change the members and that she accepted that advice. Maurice Doyle is not a political person.

I am happy to concur with that.

He is a former Secretary of the Department of Finance. Professor Gerry Wrixton is not a member of a political party. I am not putting forward a party political argument. The four people involved have not created any difficulties. It has been a little embarrassing for them to see their names flashed across newspapers to the effect that, in the eyes of Merrill Lynch, not to mention the Government, they were not suitable to be on a real commercial board, as distinct from a State commercial board. That fact would only be underlined if they were to kick up a fuss and their credibility would be further embarrassed. So they have gone away quietly for their own sakes.

However, I am not in that position as my job allows me to be less quiet about these matters. I accept that the Minister had a right to change the board members and I accept her motivation. However, I fail to accept that she acted without consulting the Taoiseach and the Tánaiste. Knowing her experience and style of operation she would have notified some of these people that she intended to get rid of the five.

I did consult.

The point is that four members went and one stayed. It seems that the legs were chopped from under the Minister when one refused to go.

This is not a party political point?

No, it is not. It is a question of how we handle the important issue of the appointment of board members.

We believe the Deputy.

The four board members were under the impression that all five were going and that this was a change relating to the future corporate governance and sale of the company.

The Deputy is anticipating Question Time this afternoon. I would prefer if we did not deal with the question at this time.

My question relates to the appointment of the new board members. The Minister in her speech names the four people and explains why they were removed. If she was allowed speak about this, then I should also be allowed do so. This is an important opportunity and I wish to make two substantive points.

It is well known that the person who did not resign was a supporter of the Progressive Democrats. I surmise that the Tánaiste said to the Minister that it was acceptable to proceed along the lines on which she was going and, when it subsequently became a problem, she backed up Mr. McKay and this put the Minister in an impossible situation. It also put the four who agreed to go in an impossible situation. They were under the impression that everyone was going. When one did not go, it seemed the Minister was treating one as chalk and one as cheese.

I approached each member individually. I had several meetings with some members. I did not intend to talk about Mr. A to Ms B. I followed that to the letter. It took two weeks.

I accept that.

I would prefer if this matter was dealt with by way of questions. There is a question on this matter tabled for the afternoon. It would help keep good order in the House if this was dealt with during Question Time.

I am not happy with this aspect as the Minister must have received prior approval which was then not forthcoming.

The Deputy will have an opportunity to raise this matter in the afternoon.

My point is that this situation may arise in the future with another board.

It will arise all the time.

The Deputy should address his remarks to the Chair as he might not invite interruptions.

I am happy to do so, a Leas-Cheann Comhairle. The Minister has acknowledged that this may and will happen in the future. However, she made a critical statement on "Morning Ireland" that her style of operation was that if someone refused to go she would not force him.

How will she get anyone to go? She has created a serious precedent that no one else—

I will appeal to their public spiritedness.

The Minister should allow the Deputy to make his point.

Is the Minister saying that Mr. McKay did not have public spirit?

The Deputy may have no powers of persuasion, I have.

The Minister will have an opportunity to deal with this in the afternoon.

I look forward to your latitude on that occasion, a Leas-Cheann Comhairle, when we deal more aggressively with this issue. I will not labour this point any further but the Minister knows of my concerns.

I would be delighted to walk the path with the Deputy. Last week he said they must walk the walk and talk the talk.

The Minister should allow the Deputy make his contribution without interruption.

I am afraid that Deputies are going to move from talking the talk to walking the walk very shortly.

Section 2 deals with repeals. Oftel Communications operators have pointed out to me that some of these repeals relate to powers Telecom Éireann has concerning the messy business of digging up roads and putting in wires and cables and so on. We need statutory rights in our objector culture in which people object to everything for no good reason. They see issues of trespass and other problems.

The Minister should go about this differently. She should drop the repeals as Telecom Éireann should not be given an advantage over Esat. The Minister should give everyone licensed by Etain Doyle the same powers as Telecom Éireann. This would be another way of achieving the same objective. She should not go ahead with the repeals but confer all licensed operators with the powers set out in the Schedule.

The decision has been taken to change the name of Telecom Éireann to Eircom.

A daft decision.

Yes. This will go on every call box, van and so on and it is a huge waste of public resources. It is like the ESB spending £4 million on its corporate image when it has a monopoly. It is a waste of money.

I will return to the pension situation at some future point. The Minister kindly sent me a memorandum on the issue which set out a figure of £725 million to be paid by the Exchequer to top up the Telecom Éireann end of the pension. This is in addition to huge transfusions of money and the ESOP. The total proceeds of Telecom Éireann are being walked away by individuals.

The Deputy should go back to his party's time in Government in 1983.

The sum of £725 million is incredible. I want everybody to have a proper pension, but it is incredible that the amount involved has increased from £460 million to £725 million despite the other sums put in. I will deal with this matter in detail on Committee Stage.

Irrespective of State ownership, we must deal with the cost competitiveness and infrastructure issues which are the key to development. The Minister should seriously consider giving some free and discounted shares. She has created a dangerous precedent in her handling of the board's membership which will cause problems in the future. However, I pay tribute to Telecom Éireann and wish the new non-State commercial company continued success.

Dr. Upton

I join the Minister and Deputy Yates in paying tribute to the people who worked with the former Department of Posts and Telegraphs and Telecom Éireann over the years when times were more difficult and who made the company what it is now.

I welcome the opportunity to contribute to the debate. Telecommunications is at the heart of the information revolution which is changing the face of society. The pace of change in the sector is phenomenal and, undoubtedly, the information revolution will form one of the most powerful forces for change in the new millennium. Politicians have responsibility for deciding what role the State should take in this process and how it can be used as a force to benefit all citizens. The most important issue is how we avoid creating a new division in society between the information poor and the information rich.

To date, I have been disappointed at the engagement of the Minister in such questions. She has singularly failed to provide her vision of how the challenges caused by the rapidly changing information revolution will be faced by politicians. The Minister has concentrated on the detailed work of her Department but we have no idea of the context in which her individual decisions are made. A short-term view dominates her thinking and I hope that in responding to the debate she will provide a more expansive view of how the rights and duties of the citizen can be upheld as we enter the new millennium which will be dominated by the information revolution.

Telecom Éireann has a pivotal place in the Irish telecommunications industry. In common with many other traditional State monopolies, Telecom Éireann has undergone an intense period of change to face up to the new competitive market which our membership of the EU entails. Its employees, unions and management deserve our gratitude for the constructive and positive manner in which major change has been implemented in the organisation. I and the Labour Party believe that Telecom Éireann will continue to play a critical role in the exciting development of the telecommunications industry in the coming decades.

One of the most dynamic actions taken by the Minister, Deputy O'Rourke, since she took office was to bring forward the full liberalisation of the telecommunications market. I compliment the Minister on this policy decision. While many of us on this side of the House have legitimate concerns about some of the implications of this radical move, we recognise the potential growth and dynamic that such a move will produce in the economy. In a system of Government which often suffers from the cautious approach of politicians and civil servants, the Minister's liberalisation drive stands out as a brave and significant decision.

The Bill outlines the role the Minister and the Government wish Telecom Éireann to fulfil in the new liberalised market. The Bill removes the legislative obstacles to the public flotation of Telecom Éireann and transforms the nature of the company. Despite the technical nature of the Bill, it raises major questions about Telecom Éireann and I hope the Minister will respond to these points in her reply.

By European standards, land line telephone penetration in Ireland is relatively low. Approximately 83 per cent of homes in Ireland have a land line connection while most of our European partners have a telephone penetration level of approximately 95 per cent. This relatively low penetration level has major implications when one recognises that telecommunications will play a major role in the social, economic and political life of citizens in the coming decades. Increasingly, people will access information through the Internet and communicate with each other by e-mail. The Minister is aware of these future developments and has taken significant steps to ensure that in the commercial world Ireland is ready to participate fully in e-commerce.

However, the impact of the telecommunications revolution goes far beyond the commercial and economic field. The lives of ordinary people and their social and political role as citizens will be radically affected by the telecommunications revolution. Given this fact, there is an obligation on the Government to ensure that the maximum number of citizens have access to information and are in a position to make informed choices. However, approximately 17 per cent of Irish households are not served by the current telecommunications network. There is in this figure the seed of a new division in society between the information rich and the information poor.

Does the Minister believe that the new liberalised market alone can bridge this gap and ensure that all citizens have access to the new information revolution? How will the liberalised market take up the essential public service obligations that Telecom Éireann previously performed as a State monopoly? Given that the Bill repeals section 110 of the Postal and Telecommunications Services Act, 1983, a section which requires Telecom Éireann to comply with general policy decisions made by the Government, will the Minister ensure that the new inde pendent regulator of the market receives a clear policy direction from the Government to ensure that the liberalised market fulfils public service obligations?

Public service obligations cannot be viewed as a static concept. While I referred to the percentage of homes which have access to telephone lines, I only used it as an example. The nature of change in the modern telecommunications industry is such that infrastructure and services must always be updated. There is an obligation on the Government to ensure that modern infrastructure connects the entire country. This is a vital economic and social necessity which Telecom Éireann fulfilled in a monopoly market. Now that the Minister is preparing to divest herself of her shareholding in that company, we must be clear about how the new challenges will be addressed in the new market. The Bill also fails to outline the amount of the shareholding that the Minister will float. If the legislation is passed, this will be a crucial issue. Will the Bill herald the wholesale privatisation of Telecom Éireann? Does the Minister envisage that the State will maintain a major shareholding in the company?

In relation to the owners of Telecom Éireann, we may soon find ourselves in a remarkable situation where one company has a major interest in Telecom Éireann and Esat Digifone, the two largest telephone operators in the State. KPN and the Swedish company, Telia, currently hold a stake in Telecom Éireann and have an option to acquire a greater shareholding. However, Telenor, which is a Norwegian telecommunications company, may soon merge with Telia. Telenor has a significant 40 per cent shareholding in Esat Digifone. The situation could emerge in the coming months where one company has a significant stake in the two largest telephone businesses in Ireland. This matter requires the attention of the Competition Authority and I ask the Minister to indicate the advice she has taken on this matter to date and her opinion of future developments.

At present there are four worker directors on the board of Telecom Éireann, two of whom have voting powers. There is a large degree of ambiguity about their role in the company when the public flotation occurs. Worker directors have played a significant role in transforming the fortunes of Telecom Éireann and this important contribution should not be jettisoned as the company takes on a new structure. I urge the Minister to ensure that the position of worker directors in Telecom Éireann is bedded down in a new agreement before the Bill completes its passage through the Houses of the Oireachtas. Modern companies can only thrive where co-operation and engagement with the workforce forms a key element of company policy. Worker directors are essential to the future success of Telecom Éireann and I hope that as a shareholder the Minister comprehensively deals with this point before the nature and structure of the company is legally altered.

I take this opportunity to impress on the Minister the urgent need for reform of the Telecommunications (Miscellaneous Provisions) Act, 1996. The recent electricity regulation debated in this House the week before last imposed a duty on the electricity regulator to attend Dáil committees. This important facet of democratic accountability is missing from the 1996 Act and needs to be addressed. The Minister could have used the Bill before the House today to achieve that. I accept it may be more appropriate to bring forward such a change in separate legislation. However, this change should be made as soon as possible. When the Electricity Regulation Bill comes into law we will have two regulators operating different standards of accountability in relation to important committees of this House. That situation is untenable and must be standardised.

In addition, I impress on the Minister the need not just to require regulators to appear before committees, but to state in the law that regulators should have regard to any conclusions or recommendations of a committee. I urge the Minister to amend the Electricity Regulation Bill in committee to allow for this provision and to amend the 1996 Act to require attendance before Dáil committees by the Telecommunications Regulator.

This Bill opens the way for the public flotation of the State's shareholding in Telecom Éireann. However, it does not make clear how much of the company the Minister intends to divest herself and the State of. If the Minister sells off the State's holding, it will send out a very clear signal that this Minister and this Government see no role for the State in the future development of key strategic industries. With regard to the telecommunications industry, the State will have hived off the role of regulation of this market to an independent body and sold off its role as a key player in the market through public flotation. It will represent total withdrawal by the State from any significant involvement in telecommunications.

The Bill establishes a mechanism for the sale of the State's holding in Telecom Éireann. We deserve to know how extensive this sale will be. We should also know whether the strategy follows a blueprint for the Minister's future intentions for other State industries as new competitive markets are established.

Other points arose during the debate. One relates to the cost of access to the Internet, which is grossly excessive. It is important, if we are to develop in the information age, that we have access to information. There is a strong case for moving vigorously to reduce the cost of access to the Internet. It is dear enough in Dublin but in some parts of the country the cost is excessive.

I will refer briefly to the manner in which the Minister succeeded, with an 80 per cent success rate, in talking people out of staying on the board. In the world of politics, an 80 per cent success rate is not all that bad.

It is a 20 per cent failure rate in my book.

The Deputy sees only half-empty glasses; I see only half-full ones.

Dr. Upton

I am sure we would all settle for 80 per cent of the first preference votes in the forthcoming election.

There is not a forthcoming election.

Dr. Upton

It will happen sooner or later. I have had some encounters with two of the four members who left the board. Mr. Maurice Doyle turned up at the Committee of Public Accounts when I was on it and he was Governor of the Central Bank, and had many interesting and challenging things to say on at least some aspects of it. He always struck me as a very honourable civil servant who has served the country well. I have also known Professor Gerry Wrixton over the years. He is a very distinguished engineer, not just by Irish standards but by international standards.

He is also President of UCC.

Dr. Upton

Perhaps he has enough on his plate. Both of those would have been exceptional people to have on the board, particularly Gerry Wrixton who has played a major role in the development of the electronics and computer industries here and has made an outstanding contribution in that area. I would have had the height of confidence in their capacity, but I am not from the commercial world.

I wish to share my time with Deputy Roche.

I welcome this Bill. In doing so I commend the Minister for bringing it to this stage. A former colleague of mine in the Communications Workers' Union, Con Scanlon, told me that he would like to express his gratitude and appreciation to the Minister for the unprecedented consultation process in which she engaged and the hard work put into this. That is acknowledged and appreciated in the Communications Workers' Union and by workers generally in Telecom Éireann. That, in itself, creates a good healthy environment.

In the years before Telecom Éireann was vested, I learned three things from my experience as an employee in the Department of Posts and Telegraphs – patience, patience and more patience. I never thought the country's telecommunications service could be transformed overnight. Telecom Éireann inherited a service which required a major shake-up. Morale was low and job satisfaction was non-existent. Losses were running in excess of £100 million per annum. The organisation was under-motivated. A clear strategic plan did not exist, and set targets for management had not been agreed. Staff worked in extremely difficult conditions and most of their time was spent making excuses for their inability to provide telephones for waiting applicants. Many people had to wait up to seven years for a telephone, and that was only 15 years ago. Ministers did their best, but the Government's answer to Telecom Éireann's problems was to increase the cost to the public and the business community of an already overpriced and inefficient service. This resulted in a market turn-off. The problems, therefore, were acute on vesting day and required swift action by the staff, the board, management and unions. This action was taken.

However, there is still much to be done. There is no room for complacency, even at this stage. Telecom Éireann built on the foundation of the accelerated development programme to modernise the network in the 1980s and improve the overall quality of the telephone service. I pay tribute to all the Ministers, from all governments and parties who were involved. I pay particular tribute to the former Minister for Posts and Telegraphs, Deputy Albert Reynolds. I was involved as a trade union official in negotiations with him at that time and with his Minister of State, Mark Killilea. I pay tribute to them for the part they played in transforming Telecom Éireann into a modern communications network. They identified what needed to be done. Deputy Reynolds killed the waiting list mentality by working hard to get to a situation where people could get a telephone when they wanted one rather than when some faceless organisation decided they could have one.

Telecommunications in Ireland today has entered a new era, and the challenges that Telecom Éireann will face will be no less demanding than those which it has faced up to now. Telecom Éireann is not on its own. All companies face massive challenges and competition. Despite the winds of competition that have blown around Telecom Éireann for some time now, it is still the biggest and the majority provider of fixed-line telephones, and it is the clear market leader in mobile telephony. Fianna Fáil has never forgotten the contribution to that success of the staff of the Department of Posts and Telegraphs and of Telecom Éireann. The staff worked under extremely difficult conditions at the time, and it is only right and proper they should now reap the rewards for the hardship they had to endure.

In making Telecom Éireann one of the most modern and efficient telecommunications companies in the world and one which will go from strength to strength, attitudes had to change. Changing attitudes and work practices is a major problem in any organisation. The Department of Posts and Telegraphs had been doing things the same way for 50 to 60 years. Asking staff to change their work practices overnight was seen by many as a threat to their security of employment. However, I am glad to say Telecom Éireann is now a customer-oriented organisation with an awareness that the customer must be kept happy because he or she is the person who pays the wages and makes everything happen.

Now and in future, money will be made in the telecommunications business by transmitting information around the world, and Telecom is one of the major transmitters of such information. It has worked closely with IDA Ireland in the past to attract new companies in the service area to Ireland. Up to the early 1980s, there was no possibility of getting financial service companies to locate in Ireland because of the poor telephone service. Telecom Éireann is now one of the leading contenders for major jobs in this area in Europe. It has played a vital and significant role in attracting foreign investment to Ireland. Telecommunications is one of the major factors in determining whether a company will locate here. It is vital to the survival of any company.

New services will emerge in future and the prize will go to those who make the right choices. I have every confidence in Telecom Éireann's ability to meet the challenges which lie ahead. It is well equipped and has professional, dedicated and skilled young staff to meet those challenges. The staff are highly motivated with all the expertise required to meet any challenge which lies ahead. Many of them are known to me and I know they are very proud, as I am, of the company for which they work.

The workforce has made significant sacrifices. Throughout the company, people who were Civil Service oriented had to become customer oriented because they had no doubt that Telecom Éireann could not exist in isolation. It came from a protected environment into a liberalised one. In a liberal and global market with well resourced worldwide players in the era of the telecommunications revolution, the board, management and union realised it was necessary to amalgamate or die and they have already made this decision with their strategic alliance. However, this was not easily achieved. I pay a special tribute to Con Scanlon, the General Secretary of the Communications Workers' Union, to his predecessor, David Beggs, and to the management and staff at Telecom Éireann who worked tirelessly and came to an understanding that they had to move on because the modern world does not stand still for anyone. If the world were a different place, it could have remained as it was and not have bothered with a strategic alliance, but in reality people pass one by if one stands still. They do not want to know why one is standing still.

As a result of dedication and sacrifices, the people of Ireland will have great pickings from this fruitful tree. However, they too must be applauded for their loyalty because they stuck with the organisation through thick and thin when the service left a lot to be desired. Telecom Éireann still retains the majority of those cus tomers. That is something of which it should be proud.

The Bill is necessary to ensure the company is privatised as stated in An Action Programme for the Millennium and in keeping with the spirit of Partnership 2000. The Government aims to create the necessary climate to facilitate the growth of Telecom Éireann in the evolving information society. I am glad the staff will benefit from the employee share ownership plan because it will give them a say in how their company is run and will allow them to have pride in it.

I am proud to have been an employee of Telecom Éireann and a member of the Communications Workers' Union. I wish the staff well and know they will succeed because they have the dedication and will to do so. I also pay tribute to the chief executive of Telecom Éireann, Alfie Kane, for the manner in which he has conducted his business since he was appointed.

I thank the previous speaker for sharing his time with me. From the foundation of the State, we slipped into the mode of establishing State-sponsored bodies. They happened more or less by accident and grew up a little like Topsy without much intellectual consideration as to how they should be set up, how they should operate, how they should relate to Government or how they should be funded. A very high price has been paid for the lack in that regard.

First, there has been a great deal of confusion as to the relationship between State enterprises and Government. Second, there has been very poor economic performance over the years. Third, many State enterprises have found themselves lumbered with a huge debt burden. There has also been, in terms of performance, serious sub-optimisation by a number of the State bodies. Some people felt a position in a State-sponsored body was a sinecure, an appointment for life in which one never needed to break into a sweat.

The direction being taken in the Bill is correct. It was always intended from the foundation of State enterprise that, when the infant companies grew up and became sturdy, they would be allowed to become companies in the big world removed from the State. In other words, they would be privatised.

The policy with regard to Telecom at times has been shaky. The policy relating to posts and telegraphs and telecommunications was never really thought through until vesting day in the early 1980s. I was once an employee of the Department of Posts and Telegraphs and strategic thinking was singularly absent from that Department. In 1969, the Devlin report noted that when it examined all Government Departments operating at the time, no planning was done in the Department of Posts and Telegraphs.

Deputy Brady was correct that there was no strategic thinking on the telecommunications side. It was amazing that until the middle of the 1980s a telephone was regarded as a luxury. If the Department of Posts and Telegraphs wanted to do anything in this sector, the word would come down from the mandarins in the Department of Finance to increase the charges. Occasionally, when the Department of Finance was a little stuck, it lashed a few additional pence onto the charges. The telecommunications system was not really a communications system but an adjunct of the taxation system.

All that changed dramatically with the establishment of Telecom as a stand alone State-sponsored body in 1984. That was an inspired decision because it gave people who were technically very adept an opportunity to think about their operation as a company and about the clients who bought the Telecom services.

I agree that Deputy Albert Reynolds deserves much credit for those decisions. I remember at the time, having just returned to the country, being persuaded for the first time to dip my toe into politics. There was much smirking among the Dublin intelligentsia when it was suggested by the then Minister, Deputy Reynolds, that people would not have to wait six or seven years to get a phone. I remember the guffaws among the intelligentsia—

They had their phones.

—the Doheny & Nesbitt set, when they suggested it was an impossibility that people would have telephones on demand. I remember one well placed economist who used to spend a great deal of time on Teilifís Éireann and other State monopolies pouring scorn on the efforts of the Minister. I do not remember that same intellectual genius apologising and saying that he got it wrong.

The strategic alliance wrought by the then Minister, Deputy Lowry, was a less happy step. I have always taken the view that KPN-Telia got something of a sweetheart deal, to use Deputy Lowry's own words, but I accept that the company bought breathing space at the time, that the additional expertise was valuable and that the alliance helped with the restructuring of the company.

This Bill marks the ultimate step forward and, in many ways, it is a model. The arrangement allowing Telecom Éireann staff a 4.5 per cent stake, partly in recognition of the contributions they have already made by way of pension, is inspired, politically wise and laudable. Companies, be they State or private, do not exist as an abstraction, they exist and operate through their personnel. The staff have the biggest stake in any company. It is their livelihood, and it is proper that we should have the maximum financial stake earmarked for the staff of Telecom Éireann.

I compliment the Minister who has handled this matter with a degree of sure-footedness that does her great credit. It took much courage and skill. A tremendous amount of good work has been done and the goodwill that exists among the unions, the staff and the Minister is the best indication of how wise the Minister has been.

I want to dwell on the method of placing the balance of the shares. The manner in which we handle the balance of the share placing will be a significant issue. The placing of shares for Telecom Éireann offers the State, for the first time, a unique opportunity to democratise shareholding in Ireland. We do not have a tradition of shareholding here. Shareholding has been limited to a gifted few. The Minister will agree it is important that the strategic decisions made in the weeks and months ahead should grasp this reality and should seek to democratise shareholding and open share participation in the new company to the widest possible degree.

In other jurisdictions, most notably the United Kingdom, the placing of shares in State enterprises launched on the market have been a disaster. In the case of the UK, billions of pounds of taxpayers' patrimony was lost because the shares were launched at the wrong time. That is not the case now. I cannot think of a better time to become involved in the launch of shares in this company. In the UK, patrimony was lost because the shares at the time of the launch were grotesquely undervalued. If one examines the performance of some of these shares on the first day of trading, one can easily work out that thousands of millions of pounds to taxpayers were lost. Shares were sold for a fraction of their value. The Minister was right when she referred to oleaginous, purring creatures who drew more than their fair share of the blood and the rewards. Institutions and individuals who were well placed in Britain and elsewhere and who were successful in obtaining shares on day one made a killing. I hope the procedures that will be adopted here make absolutely certain that gifted or well-placed individuals or institutions are not allowed to make a killing.

I would point out in this regard the rather incestuous nature of the stockbroking community in this city. It is a narrow group and, by definition, there are various social and other interconnections between people. I am not suggesting there is impropriety on their part but we operate in a very small market and it would be possible in that market for institutions and well-placed individuals to make a killing. We need to be cautious to ensure that does not happen.

It is a matter for the advisers who will be ultimately appointed and the financial institutions to get right the price at which the shares will be placed. I hope their fees will be pegged close to the price of the shares on day one of trading and that we will not have a situation, as happened elsewhere, where people are paid millions for their services when they evidently make the wrong decisions.

In addition to the shares earmarked for existing Telecom Éireann staff, some arrangement should be made to recognise the role of Telecom and Posts and Telegraphs pensioners. They, too, played their part and it would be equitable, just and widely accepted by the public as a positive move if some effort were made to afford an opportunity of share participation to pensioners, even on a discounted basis.

In regard to dealing with the balance of the shares, the staff are not the only people who have a stake in Telecom Éireann; the customers have a stake also. Over the years the customers have put up with sometimes indifferent yet improving services which, as Deputies Upton and Yates pointed out, were expensive. The company is beginning to lower its charges. The customers have a big stake in this company too. I agree wholeheartedly with Deputy Yates that existing customers should be recognised when it comes to the share offer. Whether this should be done by way of a limited number of free shares per telephone line, as Deputy Yates suggested, or by way of a discounted offer to customers, I am not entirely certain. Whatever the process adopted, the existing customers of the company must be given due recognition in the flotation process. Certainly, the customers should be allowed to participate. I would suggest the most appropriate way might be to allow them to participate on the basis of a number of discounted shares per line. That would be good from the point of view of Telecom Éireann also because over the next few months and years it would encourage loyalty to the company. The discounted shares could be looked upon as a loyalty bonus.

I urge the Minister to consider ways of encouraging the broader general public to participate in the shareholding also. The best way to do this would be to limit the number of shares for which an individual, corporate or natural, may apply. This is a good company and it would be seen by the market to be a good company which has significant values. Allowing the wider public to participate in share ownership would be a politically wise decision. I realise that there could be some EU difficulties in achieving this but what has happened elsewhere can happen here with some modification.

There is only one issue relating to the current operational procedures in the company to which I want to refer, that is the recently announced decision to change the name of the company. I do not expect the Minister to agree with me, but most people are mystified that a leading brand name like Telecom Éireann, which has been well established in the public mind as a quality Irish service operator, should be changed to Eircom. I cannot understand what the company is doing. I am horrified, as most people would be, at the thoughts that we will have to spend over £20 million on this. I found the arguments put forward by a Telecom Éireann spokesperson in this regard to be unconvincing in the extreme. It does not make sense that logos and telephone boxes should be changed and vehicles repainted. I can understand why companies which have gone through a bad patch should change their name. I understand, for example, why Fine Gael recently changed its logo. In that regard, I would point out that a shooting star is a transient matter across the firmament. In fact, they usually crash to earth. I would not expect the Acting Chairman to agree.

Will this be included in the Bill, Deputy?

I accept that I am straying but, given the past weekend, it might be worth pointing out that shooting stars last but a fleeting moment.

As a person with a stake in the company, because all Irish citizens have such a stake, I object to £20 million of my money being front loaded in expenditure on this piece of vanity. It is a nonsense. I remember the outcry a few years ago when British Telecom changed its logo. There is a need for personnel at the top level in big corporations to cop themselves on. I cannot understand what corporate benefit will come out of this. If this £20 million were put into improving services, to return to Deputy Upton's point, or to training personnel to be customer oriented, as Deputy Yates stated, I would agree with that expenditure but I do not agree with this. Of course that is not an issue for the Bill.

The Bill is a fine piece of legislation. The Minister has made extraordinary progress on this issue. I compliment her, in particular, on the settlement she reached with the Telecom Éireann workers. Each and every one of the Telecom Éireann workers with whom I have discussed the matter is happy about these arrangements and that is as it should be. Their stake is being recognised.

I remind the Minister of the few points I made. Everybody in the State would recognise the justice of giving some support or recognition to the Telecom Éireann and post office pensioners. I am not sure if EU regulations will make it more difficult to recognise the role of the people who over the years have put up with bad telephone services but if there is a limitation on the number of shares for which an individual, corporate or natural, could apply, it would not breach EU regulations. I am familiar enough with Articles 85 and 86 to realise that this involves a competition policy issue and there are strictures, but it does not seem to me to be beyond human ingenuity to work a way around recognising that this deal is for citizens. Maybe that is the answer. I compliment the Minister on bringing to this House, another piece of good legislation. She has done us and the people of the nation a great service.

In accordance with the rules of the House, I should declare my interest. I worked with Esat Digifone, which is a rival company to Eircell, the wholly owned subsidiary of Telecom Éireann, before my election. I am still an adviser to Esat Digifone and I am also an adviser to Torc Telecommunications, a company involved in the telephone card market.

I was intrigued by the contribution of my colleague, Deputy Martin Brady, who is a former employee of Telecom Éireann. I was struck by the idea that Telecom Éireann has withstood the winds of change which have blown around it in terms of the investment in telecommunications infrastructure and developments in the global telephone market such as the massive amalgamations in the United States. We have seen the integration of three distinct technologies brought about by three simple products which are probably the greatest inventions of the 20 century: the telephone, the television and the personal computer. The integration of these three technologies is what is forcing the massive amalgamations in the United States and the search for global growth among telecommunications companies worldwide.

It is that kind of seismic change, which perhaps could not even have been anticipated as recently as the 1990s, which is forcing the change being implemented by the Minister. Telecom Éireann has evolved from a State company under a Department to a semi-State company and then become part of a strategic alliance in a go ahead Dutch and Swedish partnership. It is now moving full scale into a market flotation to recapitalise and refund itself and face the huge wind of global change in telecommunications.

The integration of the three technologies to which I referred is forcing huge change. This is being compounded by the relatively recent development of the world wide web and the Internet. It is remarkable that nobody can predict whether or not telecommunications companies which are far bigger than Telecom Éireann will survive in the long-term. It is a strange phenomenon that the Internet is probably the single biggest threat to fixed line telephone companies. Fixed line telephones are expensive and in the near future people will be making 10p calls to the United States through the Internet. It is already technically possible but the voice quality is not great. It is only a matter of time and huge investment by large global players before that technology is perfected. This will present a massive competitive challenge to all telephone operators. It is, therefore, ridiculous for a State-owned pub lic utility to be involved in a purely domestic market. The sell-by date for that idea has passed.

Telecom Éireann has been a very strong company in the Irish market. When Deputy Reynolds, then leader of a Fianna Fáil Government, asked it to bring about a seismic change and upgrade the existing fixed line telephone market the company responded very well and the investment happened. That change occurred only ten or 15 years ago. Change was introduced very rapidly. Without the help and co-operation of the staff at that period and without the reinvestment which occurred, it would have been impossible for the IDA to attract computer companies such as INTEL into Ireland. These computer companies settled in Ireland in the 1990s because they believed we had a very good telecommunications infrastructure. It is well attested that a telecommunications infrastructure is a vital decision-making point for inward investors. If we regard that as the first phase of investment by the State and the public in telecommunications, we are now facing a second reinvestment in telecommunications technology so that we can continue to be competitive. We are not attempting to seize an advantage over the rest of the world. We are merely trying to keep up with our international competitors who have perfected these technologies already.

It is no surprise that the United States has led the field in this area. That country has the advantage of a huge domestic market and ready access to finance. It is also noticeable that the Nordic countries – and state owned companies in those countries – have been at the cutting edge of innovation, investment and the taking of market share in the telecommunications market. There is no single model for progress in this regard. Increasingly, the very successful state companies in the Nordic countries are recapitalising themselves in the financial markets.

Progress in this area mirrors what happened in the aviation industry where deregulation and change was introduced a number of years ago. The two European companies which survived most successfully were Lufthansa and British Airways. These two companies aggressively built volume to became global players in the aviation market. Other companies who did not adopt that very aggressive strategy have perished. That should be a lesson to everyone in the telecommunications market, not least Telecom Éireann.

These are the key issues. The Minister is to be congratulated on introducing this legislation. She is to be congratulated particularly for involving staff so heavily in a company which is about to go to market. This is an indication of the Government's position and of a promise made by Fianna Fáil in Opposition which is now being fulfilled. People are often cynical about election promises but this is one which was made and is being kept. It is right that staff of Telecom Éireann should benefit from the success of the company and of the flotation.

Estimates of how much money will be raised vary. Some market analysts suggest that a 25 per cent tranche could yield as much as £1 billion. That is a remarkable amount for a 25 per cent share. When Dr. Michael Smurfit was chairman of the company he predicted that Telecom Éireann would be valued at a maximum of £1 billion. We are now talking of a company which is valued at approximately £4 billion. This is a great tribute to the staff, to the company and, as Deputy Martin Brady said, to its ability to retain its customers in an increasingly deregulated and competitive landscape.

I hope the proceeds of the sale will be ringfenced and reinvested in infrastructure. A huge capital infrastructure gap is opening up in our economy and it is important that railways, roads and telecommunications derive benefit from the proceeds of this sale.

I thank Deputies Yates, Upton, Brady, Roche and Conor Lenihan for their varied and lively contributions. They noted our progress to date and the long road that still lies ahead. I will deal briefly with some of the points raised.

Deputy Yates complained about deficiencies in Ireland's broad band capacity. In that regard we liberalised alternative infrastructure in 1997 and fully implemented liberalisation. A task force is currently negotiating the development of new high capacity telcommunications links between Ireland and major commercial centres in Europe and the United States through an alliance of State and private interests. In the current budget £12 million has been allocated for the broad band connectivity and this will increase over three years to £60 million. This development must include the whole country. It would be entirely wrong to create another elite.

I was interested in the point concerning the National Competitiveness Council. On foot of the Forfás report we concluded ESOP and in one week we took three decisions – to bring forward derogation, to sell Cablelink in its entirety and to bring in an IPO. These decisions have had significant knock-on effects. The most important decision was to bring forward the derogation which was obtained in 1996. I do not fault the Government of that time. What was right in 1996 was not right in 1998. The telecommunications industry moved swiftly in those years. It is remarkable to recall that the industry argued it could not liberalise because it had a derogation. This seemed so mad that I quickly decided to bring matters forward. Forfás had recommended this so trenchantly in its report that it cried out to be done. The National Competitiveness Council's report of November 1998 compared prices and commended most of Telecom Éireann's prices.

Deputy Upton raised the importance of the accountablility of the Director of Telecommunications Regulation. The 1996 legislation was unfortunately deficient in this regard. Ms Etain Doyle is not required by law to answer to anyone. She attends the Committee on Public Enterprise and Transport and acquits herself well although she is not required to do so. This deficiency must be repaired in forthcoming legislation. The 1996 legislation does not say the regulator need not answer to anyone but it is silent on the matter. It was wrong of the Government to make this mistake and of the Opposition not to highlight it. I cannot imagine that the country will be populated by crowds of regulators who are not answerable to anyone. The mistake was rectified in the legislation to establish an electricity regulator. We will certainly remedy it within the next few months. I am discussing the issue of worker directors with the unions and will bring it to Cabinet. The difficulty is that the Worker Participation Acts cannot, in law, apply to private companies. This is the law which governs worker participation. Private companies do not come within the ambit of that legislation.

I pay tribute to Conn Scanlan and David Begg both of whom I recall meeting in the Department in the July after coming into office, on a courtesy call. David Begg called to introduce Conn Scanlan. That meeting lasted for about half an hour. We then had a few drinks and discussed various matters. Both said there was no plan B, only plan A.

I will deal with the universal service later. If we are to get into broadband productivity it should be available all over the country. Deputy Yates raised the matter of computers in homes and the need for people to be free and easy with them. The work of the information society is excellent and Vivienne Jupp is a wonderful director. The issue of the powers and accountability of the regulator was also raised.

In regard to the universal service, in the liberalised environment the Minister of the day would still have a public and regulatory policy role. This will be dealt with in the forthcoming regulations. I am concerned about the impact of the Telia-Telenor merger on the Irish market. It is important that Telia-Telenor make up their minds rather than say they will wait until after June. They have to decide quickly as we are moving on a strategy. We cannot have that kind of procrastination. It may suit them but it does not suit us, particularly now.

I have no quarrel with any of the comments made about the change of name. Those who conceive of these ideas should think of politicians who meet and deal with people on a daily basis and listen to their difficulties, challenges and so on. I cannot understand the reason anybody would want to change a known brand name to one which will be hard to get one's tongue around between now and the flotation. Telecom Éireann, warts and all, is well known. Its symbol is on vans, jackets and the hustings. People would know what they were buying if they bought a share in Telecom, but what about Eircom? We also have the problem of whether the name should be Eircom-Telecom Éireann or Telecom Éireann-Eircom. The idea was ill conceived. No final decision has been taken by the board on the matter as it has to be discussed further. I hope the new name Eircom will be included in the prospectus. That seems a sensible way of doing it. I do not understand the whole thing. It was odd thinking.

Some Deputies asked about the repeal of a particular section. The forthcoming Bill on infrastructure sharing will deal with that issue. No decision has yet been taken on the amount of retail shares. I am of the view that there should be a large amount available for citizens to purchase. We want share ownership to become an ordinary activity, not a mystery and not something for the man in the big house on the hill. I want those in terraced houses to have shares also. Some people have spare cash and they should have an opportunity to purchase shares. As a child growing up in Athlone there was a man in a big house who was reputed to have many shares. At that time I did not know what a share was. I met him while out walking with his dog and I asked him if he had shares. I was about five years of age. I think he considered I was a very precocious child. It should be a fully inclusive process. There should be a competitive pricing regime. I hope with full liberalisation that will all come about.

As Deputy Conor Lenihan said, in a few years time it will cost 10p on the Internet to call the United States. I note Telecom has finally heeded. I have issued about 12 alerts and 14 other indications to Telecom to give us a flat Internet rate. Lo and behold it is going to do it when necessity drives. That is all said in the best of form. There is no doubt Telecom must go further in reducing charges.

Deputy Yates asked for an all-Ireland tariff structure. There are many advantages in an all-Ireland tariff structure and it is worth pursuing. I have mentioned this informally to Dr. Mo Mowlam and also Telecom intends to deal with the matter.

I met Kevin Dillon of Microsoft at a conference this morning at UCD at 7.30 a.m. Since Deputy Yates mentioned Microsoft, Kevin Dillon was full of admiration for what the Government has done for the telecommunications industry. In his introduction he said we had come from being 15th to fourth in the European league in terms of performance in one 12 month period. We still have a long way to go. The big issue is not the rate of the call to New York, London and so on but why Irish businesses are not dealing in e-commerce. I do not know the reason. I have attended 38 seminars in the past 12 months in an effort to promote e-commerce. We are taking part in an awareness campaign, for which funds have been provided, in the next few weeks. Irish businesses say it will come all right, somebody else will get on to e-commerce but they do not have to get on to it. They will be left behind. Ireland has the opportunity to be the first country in Europe to get on to e-commerce. As Kevin Dillon said this morning Ireland is like a small business in physical and geographical terms. There are no mountains, rivers, boundaries or no language difficulties. We have the chance to be at the e-commerce revolution. The brave people are involved and will forge ahead. Irish businesses are tailormade for it because Ireland, like any island country, has been trading for thousands of years. I will do all I can in the next few weeks to promote the idea.

We talked about various Ministers, boards, employees and trade unions which have been hugely supportive and forward looking. They are the pioneers of bringing State companies into public ownership. As Deputy Roche said the company will go back into public ownership by people buying shares. People always bought shares but they had no script to show it. They will now own the shares and will be able to—

Will there be freedom to count on shares to customers?

No. For instance, our bringing liberalisation forward by 13 months has already had a huge monetary impact on Irish customers. If we had stayed with derogation until 1 January it would have cost the country untold millions of pounds. Customers will get a far better competitive regime. I will insist that the customers get decent tranches of shares. Little panaceas mean nothing – what is wanted is the regime we have brought about. I am very happy with that move forward.

I replied to the Deputy on the universal service obligations and the Internet. I will bring forward directives on the universal service obligations which I will let the Deputy know about.

I insist on calling the people who will buy shares "customers" but I have just been told by my officials to say that they are not customers but citizens – les citoyens d'Irlande will get the opportunity to purchase a significant amount of shares.

Under EU law there is a difference between customers and citizens.

I stand abjectly corrected – I shall lie on the floor before my officials.

They are so rebuked – they got the message.

They are laughing anyway. We neglected to speak about the civil servants who manned those Departments, even during the dreadful days which Deputy Roche told us about when the Department of Finance had an overbearing hand, although the Department of Finance still has a great deal to say about everything. They worked to their remit with integrity and commitment dealing with what was then a State run service.

It is genuinely a great privilege for me to be in charge of a Department that is able to bring forward a Bill such as this. I have spent a great deal of time – which is the job I am paid to do – in the telecommunications arena. It is an area worthy of discussion, time, debate and reflection. I hope we can move forward to Committee Stage as quickly as possible, to which I look forward. Thank you.

Question put and agreed to.
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