BT seeks all-Ireland telecoms partnership

BT is planning a merger between its Northern Ireland division and Telecom Eireann, the Republic of Ireland's state-owned telephone company.

The proposal aims to steal a march on Cable and Wireless, which was tipped as front-runner to forge an alliance with TE. The Irish company is keen to find an international partner to help it to survive as the telecommunications industry is deregulated across Europe.

BT believes that an all-Ireland telephone company would be attractive to the Irish government for political reasons. Last March C&W offered to buy 40 per cent of TE from the government for £460m, at which point the communications minister asked the Irishcompany to talk to other potential partners and report back.

The news of C&W's interest in TE initially caused a storm of protest in Ireland, with the Labour Party, which is part of the governing coalition, and local trades unions opposed. Since then, both Labour and the principal union within TE, the Communications Workers Union, have accepted that the company needs an international partner.

However, the CWU is still opposed to C&W, which it believes has a poor industrial relations record.

A spokesman for C&W said it was interested in forming a strategic alliance or a joint venture in Ireland and that it was still in discussions with TE and the Irish government. A spokeswoman dismissed the allegation of a bad industrial relations record, saying that it was in any case policy to act as a local employer in local markets.

TE is talking to eight operators including BT and C&W. Among the other interested parties are AT&T of the US and Unisource, a joint venture between Swedish and Dutch telephone companies.

A TE spokesman said the company would not comment on the details of its discussions with other operators. It is understood, however, that the company is close to making an initial report to the minister for communications.

C&W's position as front-runner is understood to have been undermined by the recent change of government in Ireland. Lord Young, its chairman, had a good relationship with the previous Irish prime minister, Albert Reynolds, and is understood to have had talks with him about C&W taking a stake in TE.

Potentially in BT's favour is the fact that TE's chief executive, Alfie Kane, used to be a senior BT executive and was chief executive of BT Northern Ireland in the 1980s. BT is also believed to be the preferred choice of the unions at TE.

TE made £81m in the year to last March on sales of £871m. It employs 13,000 people, but like other telecoms companies has been contracting its workforce in recent years. BT Northern Ireland has annual sales of about £250m.