KPN/Telia will lodge Telecom bid

CONSORTIUM including the Dutch and Swedish telephone companies will lodge a preliminary bid today to purchase a, 35 per cent stake in Telecom Eireann. The deadline for bidders to put forward, outline proposals is noon and a spokesman for KPN, the Dutch company, confirmed that it and Swedish firm Telia would lodge a bid.

It was not clear last night whether any other bids would be made with the London office of merchant bank Morgan Stanley, which is handling the sale. Spokesmen for the two other companies involved, Tele Danmark, the Danish national company and Bell Atlantic from the US, would make no comment.

Following the decision by British Telecom to pull out of the strategic alliance process, the KPN/Telia consortium has been seen as the clear favourite. Its decision to take the next step and launch an indicative bid thus comes as good news for both the Government and for Telecom Eireann.

However, while KPN/Telia would make no comment whatsoever on the terms of its deal, industry sources believe that the price the Government is likely to fetch for the Telecom stake will now be substantially lower than the £400 million to £500 million it had hoped for. Initial bids may come in as low gas £250 million, although the Government and Telecom will hope to negotiate a higher figure.

The bidders have also to indicate today how they intend to meet the Government's criteria or providing additional marketing and technological expertise for Tclecom. The Government has said that any partner will have to help Telecom meet its customers' international needs, assist in developing new services and develop the mobile phone and cable businesses.

The decision by British Telecom to pull out led to speculation about whether the strategic alliance talks could succeed. This was not only because BT was one of the favourites as an alliance partner but also because its decision not to participate means it may now take a more active approach to competing with Telecom in the Republic's market.

The terms outlined by potential partners in today's indicative bids will now determine whether the process can proceed. KPN/Telia is the most likely alliance partner, if a deal is concluded. This is because its members have large home markets and access to an international link up via a partner ship with AT&T. While the extent of this partnership is as yet fairly limited, neither of the other two companies are part of similar global networks.

Telia of Sweden also has considerable expertise in mobile telephony.

It was not clear last night whether bids would be lodged by Bell Atlantic or Tele Danmark. There has been some speculation that the two might join together to lodge a stronger bid.

A small Californian company, Airtouch, has also been involved in the talks, but its interest is purely in linking up with Eircell. As any main alliance partner is almost certain to want the fast growing mobile sector to be included in its deal, Airtouch's only chance of success would appear to be through joining up as part of a larger deal.

Any potential investor may want the Government to outline its plans for its remaining stake of 60 per cent. The outstanding 5 per cent may be held by Telecom staff.