Seanad Éireann - Volume 158 - 31 March, 1999
Postal and Telecommunications Services (Amendment) Bill, 1998: Second Stage.
Question proposed: “That the Bill be now read a Second Time.”
Mrs. O'Rourke Mrs. O'Rourke
Minister for Public Enterprise (Mrs. O'Rourke): I thank the Cathaoirleach for the courtesy afforded me when he suspended the Seanad to allow me take part in a vote in the other House. Another vote was called when I was there, but now that I am speaking here, I am paired, so they can call as many votes as they like there.
I am glad to introduce the Postal and Telecommunications Services (Amendment) Bill, 1998, to the Seanad. Its passage concluded yesterday in the Lower House. Second Stage is being taken today in the Seanad with Committee Stage being taken tomorrow.
The purpose of the Bill is to allow for the amendment of the legislation covering Telecom Éireann to facilitate an initial public offering of shares in the company. Its purpose is also to make the legislation governing the company compatible with its subsequent status as a publicly quoted company.
Before going into the detail of the Bill, I will say a few words on the background to this issue to put the proposals in a clearer context. Telecommunications has come a long way since the first developments in the telegraph system took place more than 160 years ago. Ireland has had its part to play in the history and development of global telecommunications throughout this time with a number of remarkable firsts for a country of our size. Some of these happened because of Ireland's geographical location. The first trans-Atlantic telegraph line was laid in 1858 between Valentia in Kerry and Newfoundland. The first  commercial use of radio came about with the setting up of two stations, one near Crookhaven and the other at Malin Head, to communicate with the vessels on the Atlantic shipping routes.
Since that time, the world of telecommunications has changed utterly and never more so than in the last decade with developments in information technology and with the increasing convergence between that sector and the communications and broadcasting sectors. These three previously distinct areas are now slowly but surely becoming one. This convergence has as its common denominator the concept of the dissemination of information and has already happened to such an extent that people now talk of the information and communications technology sector and the information age. We had a first when the Taoiseach and President Clinton signed up to the digital age last September. It is a long way from the days of the humble telegraph.
It is the Government's aim that the progress achieved to date should be maintained and built upon and the Government's strategy with regard to the sector has been shaped with this in mind. The primary focus of different Governments in recent years in regard to communications has been on the introduction of strong and effective competition in the marketplace. This is being done to ensure that Irish industry and domestic consumers alike receive the full range of high quality and competitively priced services now available.
Effective competition is rapidly being achieved and, with the Government's decision last year to bring forward the date of full liberalisation to 1 December 1998, the pace of change is very fast. There now exists in the telecommunications sector an equitable and open regulatory regime. It is based on a solid legal framework provided by the EU telecoms directives and our primary legislation and the Director of Telecommunications Regulation, Etain Doyle.
It is important for the country to ensure that, like its global competitors, it should have a modem and high quality telecommunications service. The Government's strategy would not have been complete without recognition of the importance for the development of the sector of the national telecommunications operator, Telecom Éireann. Without a strong and competitive Telecom Éireann, which is able to compete in a fully liberalised environment, the plans for Ireland to be among the top nations in this area would come to nought.
This was why the strategic alliance with KPN of the Netherlands and Telia of Sweden was established in 1996. This agreement entailed initially selling 20 per cent of the State's shareholding in Telecom Éireann, with an option for the strategic partners to buy a further 15 per cent later this year. The strategic alliance agreement gave a vital injection of cash which helped deal with the company's debt and gave the company access to the expertise needed to prepare for competition. In the three years since the agree ment, the company has made major progress in restructuring its costs and tariffs and technologically in the range of advanced digital services it now provides.
The employee share ownership plan, ESOP, between the company and the unions, which will shortly be finalised, is also of major importance to the company's ability to look forward to the future with confidence. The agreement involves the sale of 9.9 per cent of the company to the employees with an additional 5 per cent being transferred to the employees in return for an agreement on company transformation, such as work practices and changes in staff numbers.
Before I move on from this point, I will give a brief overview of the present shareholding structure of the company. The net result of the strategic alliance and the ESOP has meant that the Government's shareholding in the company will be reduced to 65.1 per cent. Part of the agreement with KPN and Telia is that they have the option of buying a further 15 per cent of the Government's shares. This option comes into effect soon and, if they choose to exercise it, the amount of shares held by the State would come to 50 per cent. The purpose of the Bill is partly to allow for the reduction of the State's shareholding below the 50 per cent level.
This is the logical cumulative effect of the wise policy measure to take in strategic partners. Other matters, such as the arrangement with KPN and Telia and pricing, will come under scrutiny later. The net result is that it is feasible next July or August, post flotation, that Telecom Éireann, or whatever it chooses to call itself once that process is completed, will be owned by the strategic partners. We used to quaintly call them foreigners but we no longer use that kind of language. It is as well to be clear about this aspect now. I intend to say it clearly in the future before a new level of caterwauling begins about it as if I had somehow hidden the fact. If the strategic partners, who have brought great expertise to the company, hold 20 per cent of the shares and stand to gain 15 per cent they will hold 35 per cent, leaving the Government holding 50 per cent. Given that the Government will sell a tranche of these shares it is highly likely that the greater number of shares of the company, by whatever name it calls itself then, will be held by KPN and Telia. I have no difficulty with that, but I have difficulty with people suddenly discovering it in a month or in six weeks and engaging in a nationwide screech about it when the arrangements are already in place. It appears to have struck nobody that that will be the situation.
In the past the most widespread organisational structure for telecommunications was an integrated State owned monopoly such as Telecom Éireann. In the past those kinds of monopolies were seen as a necessity for the security and welfare of the State. They provided essential services where the provision of such services would not have been economically attractive to the private sector. Today there are new service providers  with the technical and economic means to compete fully in the telecommunications market. This is especially so in terms of our global competitiveness.
Part of the liberalisation of the market involves the restructuring of ownership and control of the former state owned telecommunications operators. Nearly all of the former state owned telecommunications companies in Europe are no longer in full state ownership and most are now public companies. It is recognised that to be competitively successful and to be able to deliver the range and standard of services these companies need to be able to operate freely.
As I have stated elsewhere it is very much because of the circumstances prevailing in Ireland that the Government has agreed to conduct this initial public offering of shares in the company at this time. It is not because of a blind desire to follow current international trends. There were highly misguided and misdirected privatisations within the UK in the 1980s, especially in the early 1980s, which did not result in better services to consumers but resulted in big fat cat salaries for groups of people at the top of such companies. By contrast, different Governments participated in this programme for Telecom Éireann and it is being proceeded with at the proper pace.
At present, the market trends for telecommunications shares seem quite favourable, although such things are always subject to market volatility. European telecommunications shares have not been immune to this volatility but they have consistently outperformed equity markets in general and have shown the ability to withstand even the most volatile of market environments. This was in evidence even a few weeks ago when there was a general rise in European stock market values following the announcement of better than expected third quarter results from British Telecom.
While all of this augers well for the initial public offering, the amount of money which the Exchequer will raise cannot be determined. The decision on what to do with the proceeds of the sale is ultimately one for the Government. Other decisions that will need to be made in consultation with Government colleagues include the price range to be set for the shares, the proportion of the shares to be divested in the IPO process and the proportion, if any, to be retained by the Government and for how long. We will be making those decisions based on the best advice available.
One of the objectives of the IPO which I mentioned earlier is that it should promote wider share ownership. It is my firm intention that there should be a significant tranche of the shares available to the citizens. This is a personal objective of mine, one which I know is shared by the Government and most parties. It is only right that the Irish people should be a significant beneficiary of this flotation. It is they, after all, who have  contributed so much to the company's development.
It is estimated that, after the flotation, Telecom Éireann will be the third most valuable indigenous company listed on the Irish Stock Exchange. It is entirely appropriate that the public reap the benefits of this success, the main benefit being the opportunity to be part of the future of the company. Through a widespread shareholding, citizens will be able to share in the successes of the company and to have a say in its development over the coming years. This, in my view, 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.
A significant proportion of shares will also be available to institutional investors who are so important to the success of share offerings. While the benefits to citizens are to me the most important, institutional investors must be allowed to participate in a way which creates a positive trading environment and the proposal to opt for flotation on the Dublin, London and New York stock exchanges is in line with this view.
Before I go on to the detail of the Bill, I should mention the various discussions which have been a necessary part of the process. Participants in these include the various Departments, the company, the strategic partners, that is KPN and Telia, the trades unions and the former workers of Telecom Éireann. Each of these groups has made a valuable contribution to the consultation process. I thank all of them for that.
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 to take place. This includes providing a mechanism whereby the expenses of the process may be paid by way of moneys voted by the Oireachtas to the annual vote of my Department. That was made public in the Estimates at the end of last year. The issue of the company contributing to cost has arisen in the context of the earlier Dáil debates. I can confirm that my Department is in discussion with the company to achieve, as far as possible and having regard to all the circumstances involved, a basis for sharing the costs of the flotation.
I should mention a new provision in the Bill as a result of yesterday's Report Stage debate in the Lower House. This was an amendment proposed by Deputy O'Shea which has been inserted into the Bill as a new section 2. This section provides that, once I have agreed the details of the sale of shares with my Government colleagues, the general principles of the sale – not the terms because they would be confidential – will be laid before the Dáil for debate and the approval of the Dáil before the sale of shares commences.
Another provision in this first category is that set out in section 9. The purpose of this provision is one of clarification. It basically clarifies the question of the Minister's powers to enter into agreements for the sale and/or issue of equity in  the company and the scope of any such agreements.
The provision also deals with 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 when it was setting up the strategic alliance. The present provision in the Bill extends 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, and this includes the ESOP agreement.
The second broad area of the Bill covers matters of concern to the employees of the company. Section 5 deals with the pension entitlements of Telecom Éireann staff who were former employees of the Department of Posts and Telegraphs. It provides that their superannuation entitlements 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. This will apply 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 6 removes Telecom Éireann from the scope of the Worker Participation (State Enterprises) Acts, on the basis that such obligations are inconsistent with its becoming a publicly quoted company. Following the IPO, the company's 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 provides that the present worker directors and their alternates may remain in office until the appointment of the new board of the company. To allow for this, the Bill gives the Minister the power to specify, by order, the date on which their term of office ends.
This was one of the issues which arose in the debate in the Lower House and I was able to confirm to the Deputies that I am considering this whole issue and intend consulting with my Cabinet colleagues on it. I have already met with representatives of the Irish Congress of Trades Unions and I have discussed the issue with them. I have, most recently, been in correspondence with Mr. Peter Cassells on the matter and have also met with representatives of the Communications Workers Union on this issue.
I quite understand how the workers, coming from a position of worker participation under a particular Act and going into a situation where it is agreed that Act is no longer of relevance when it is a publicly quoted company, must reach an arrangement. In the talks ongoing, Mr. Cassells, representing ICTU, and Mr. Dermot McCarthy, representing the Taoiseach and Partnership 2000, hope to come to an arrangement with the input and support of my Department whereby somebody, not necessarily a worker but somebody who would be in concert with the needs of workers, will be able to be appointed to the board. There  is, as the House will be aware, already an arrangement for an ESOP director, Deputy Dick Spring. The Communications Workers Union conveyed that appointment to me about a month or six weeks ago. I was happy to receive the name. I will only have a technical role in his appointment when the Bill is enacted because the name is given to me. I am quite sure Deputy Spring will be a full member of the board in every sense. I welcome his participation. Politics does not enter into the matter if a person is capable, competent and professional, qualities all of which one could attribute to Deputy Spring. I am happy to know that he will be a member of the board and I look forward to the day he is welcomed to the board. In case people would confuse the dialogue now between ICTU and the Taoiseach's office with that in regard to ESOP, this is a separate appointment.
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 seen as equally inappropriate to Telecom Éireann.
The power of the Minister to issue policy directions to the company under section 110 of the 1983 Act is also seen as inappropriate to a company with an obligation to its shareholders to pursue a commercial mandate. I cannot do so. This power 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.
Following an Opposition amendment proposed by Deputy Yates on Committee Stage, I have extended this provision to cover other operators in the sector. I have also used the opportunity presented by his amendment to extend to these operators other provisions which, at present, only cover Telecom Éireann. The extension of these provisions is in line with the need to have an equitable regulatory environment for all operators.
The fourth and final area dealt with in the Bill provides that the company operates on much the same basis as not just other telecommunications companies but other publicly quoted companies operating under the Companies Acts. For example, section 3 repeals certain parts of section 46 of the 1983 Act relating to the company's obligations regarding the superannuation schemes that it establishes, like the requirement for ministerial approval. Obviously that has nothing to do with it.
Subsections (9) and (11) of section 46 of the 1983 Act are also being put forward for repeal in the Second Schedule to the Bill. These concern  the Minister for Finance's contributions to superannuation schemes covering former employees of the Department of Posts and Telegraphs. I can confirm, however, that these provisions will only be repealed if and when the Minister for Finance decides to discharge his liability in this regard.
The remainder of this category being dealt with in the Bill largely comprises the repeal of various existing provisions as identified in the Schedules to the Bill. They cover issues that would normally be dealt with under the Companies Acts. As for the commencement of the Act, section 11 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, depend on the progress achieved in the various elements of the IPO process that I have touched upon today. The completion of the IPO process and the transformation of Telecom Éireann into a commercially driven, publicly quoted telecommunications company is seen by the Government as a major step towards the achievement of a competitive and high-quality telecommunications sector in Ireland.
Is there a sos in the House today?
Mr. D. Cregan Mr. D. Cregan
Acting Chairman (Mr. D. Cregan): Yes, between 1 p.m. and 2 p.m.
Mrs. O'Rourke Mrs. O'Rourke
Mrs. O'Rourke: I am taking oral questions in the Dáil, so I will not be back when the House reconvenes at 2 p.m. I checked with the Whip's office and my duty is to answer oral questions. A Minister of State will attend to take the Bill.
I wish to refer to the Communications Workers Union from which I expect all Senators received a letter. In the past three to four weeks there have been numerous media reflections, to put it kindly, on employee share ownerships, all with one aim—
Mr. Gallagher Mr. Gallagher
Mr. Gallagher: A motion has been put down by Senators Ross and Norris to review that.
Mrs. O'Rourke Mrs. O'Rourke
Mrs. O'Rourke: That is interesting and it is the Senators' entitlement to do so. I hope the 1996 arrangement will also be reviewed. Is the motion being taken today?
Mr. L. Fitzgerald Mr. L. Fitzgerald
Mr. L. Fitzgerald: No, it is on the Order Paper.
Mrs. O'Rourke Mrs. O'Rourke
Mrs. O'Rourke: When I entered office, ESOP was bubbling but had not come to the boil; it took a great deal of discussion to bring it to fruition. The articles being written now are not correct in their facts about employee share ownership. I regard it as part of my task today to ensure the facts are put into the public domain. I know others will do so but I do not intend to let the opportunity pass. Reading some of the articles in newspapers, one would think we opened our purse and handed out 15 per cent, but that is not the case.
It was agreed by the previous Government that 5 per cent of shareholdings would be given in  three phases. Verification that the transformation would occur was necessary and hundreds of targets were set from the blue book. The transformation agreement contained some of the most radical work practices. I have read that and the provisions in the blue book and I wish some of those writing about it would also. We are talking about moving from a monopoly to competition. The mindset of people must be changed, as must the way they do their business so that a strong competitive market is created.
The 9.9 per cent, which if we were to believe the newspapers was handed out just like that, is being funded according to the following schedule: 5.3 per cent pension contribution by staff, which our actuarial advisers value at £200 million – staff gave up their pension rights, which they were entitled to by law, being civil servants; a capital contribution of £100 million by the company to the ESOP trustees on foot of its contribution; forfeiture of the annual bonus scheme of £10 million which was laid out in work agreements signed by both management and company and the raising of a £95 million loan by the workers which will have to be repaid from dividends when they receive them. This agreement was concluded in March 1998.
The strategic partners paid £103 million for a 20 per cent stake, on which there is a clawback arrangement. I smile when I read the articles written on this subject. They never discuss what happened in 1996, which is supposed to be such a wonderful arrangement, although it is good. Journalists write about what workers got, although they paid for it with their own money which they borrowed, about which not a word is written. The union coalition was in discussion with the Department to acquire 14.9 per cent. In case anyone thinks that when this Bill is signed union members will fill their pockets with cash, the 5 per cent shares will be available after five years, when the transformation is completed and the 9.9 per cent shares will not be available until the full loan of £95 million is paid, which will take between seven and ten years.
Of course, this will not be written about. We will continue to read of the denigration of workers and previous workers who, by their own efforts, have helped to achieve the signing of the ESOP in one year. I went to the unions about the sale of Cablelink, which is now proceeding. No previous Government had even tackled it. The trading sale will happen with Telecom in May. I went to the unions with three suggestions which were sacred cows before ESOP: the sale of Cablelink; the bringing forward of the liberalisation date, which was brought forward by 13 months; and to proceed with IPO.
I wish there was a good, thorough, comprehensive, far-sighted and fair media discussion of all of these matters, which I know will not happen. It is not my place to publish these facts. However, I take this opportunity to put my case forward. Not one journalist has written about the strategic alliance of 1996, which I welcomed as it enabled  the process to move forward. We need balance. It would be great if the two Senators who put down the motion on this were present. Perhaps I will get the opportunity to discuss it with them some other time.
We will enter into commercially sensitive waters once we get into the business and I do not intend to say what I believe the shares will make as it is for the market to decide. I do not intend to enter into discussions about various matters. I have taken a vow of silence but I will write a short book when it is all over which will include matters which were the subject of debate last week and the things behind those matters. I will call it “The Real Story behind Telecom Éireann”. I do not intend to tell my story now because I am precluded from doing so. My lips are sealed. Although the Taoiseach has told us not to write books about our time in office I will do so. I will write a pamphlet or something like that, by which stage I hope the shares will have been sold very well and we will be on a more even keel about it.
The chairman I had appointed last January whom I regarded with great affection and warmth had already worked six months without pay for us on the telecommunications committee and two months following that at the rate of £7,500 per year. It evokes many more queries. I always knew he would get other offers. One cannot commercially tie down a person who is benefiting only to the tune of £7,500. There was a clear conflict of interest which neither the advisers nor I could stand over. In great sadness, he had to part. I was sad when the vice-chairman resigned for whom I felt great warmth and friendship. He did not want to continue and is entitled to do that in the same way as Senators are entitled to come here. We moved with speed last week as speed was of the essence. The board is moving along, it has had its meeting and is going about its business.
I look forward to listening to Senators' contributions.
Acting Chairman Acting Chairman
Acting Chairman: I wish to inform the House that there is no sos. The debate will continue between 1 p.m. and 2 p.m.
Mr. O'Dowd Mr. O'Dowd
Mr. O'Dowd: This is a very important debate and that the IPO is the first in the State challenges the minds of commercial and public interests. My party supports this Bill and we will not challenge any issue on Committee Stage.
The Minister spoke at some length about the employees of Telecom Éireann and I concur with her views. Obviously, the people who have built up a company from its foundations to become the excellent, dynamic company that Telecom Éireann is becoming are entitled to have a fair share of the profits issued through whatever shareholding has been agreed by the parties concerned. I welcome this, as do the workers; it would be churlish to oppose it. If any decent modern, dynamic company wishes to progress it must give a fair share of its profits to the workers. Companies who do that in the private sector get  more than a just reward for their commitment to the workers.
The initial public offer has caused a great deal of interest and controversy. Anything new generates interest and concern. Other companies now in the ownership of the State, such as Aer Lingus and Aer Rianta, will go on the public market in the future. It is important that the steps and procedures adopted here and the lessons learned from the IPO will be used in launching other companies.
While technology and computers are changing overnight we do not know what is in front of us. What may be very popular and new today will be old hat in a year's time. The telecommunications market will change radically as technology changes. It is important that Telecom Éireann is at the cutting edge of this change and is leading that technology. Telecom Éireann is more than able to compete in the world market.
Consumers have mentioned a number of important issues on Telecom Éireann. One of them is that the cost of business calls has been reduced. Telecom Éireann is providing an increasingly efficient service to business people. Unfortunately, private consumers – domestic users of a telephone – are not getting a good deal. I would like to see Telecom Éireann radically change its policy on local phone call charges and trunk calls for the private consumer.
There are no charges for local calls in America. At the very least I would like to see a change in Telecom Éireann's policy. At present the charge during the day is for a three minute unit. A person pays for three minutes whether or not he uses them. I would like to see the introduction of a per minute or a per second billing for everybody. One should pay for what one uses. I would also like to see charges reduced as there is an increasing use of the telephone for modern communications.
I am concerned about mobile phones. If one were to believe the advertisements in the newspapers it appears they are being given away. For example, people can get a free mobile phone if they buy a colour television and so on. The cost of using mobile phones must be examined. It is totally prohibitive. I accept there are different times for different users and some people use phones for social as opposed to business reasons. The charges being levied are far in excess of what they ought to be. While I welcome increased competition and while it effectively reduces costs, using a mobile phone is far too expensive. A call on a mobile phone received outside this country will give rise to an excessive charge for it. We live in a free world and in a democracy, but these special offers are anything but special for the consumer at the end of the day because they are being drawn in and overcharged.
I have spoken to some Telecom Éireann workers in County Louth who have told me there is an amazing increase in the number of phones which have more than one telephone line. Many people are using computer technology for  communications, education and recreational use. While I accept and acknowledge that Internet charges have been reduced recently they are still excessive. If we want to have a dynamic, modern State we must have dynamic modern communications. The excessive cost of Internet charges prohibits that advance.
I have three children and my Internet bill is approximately £50 per two months. I do not mind paying the bill. My children use the Internet much of the time and other children communicate with them. It is a wonderful way to communicate, to make new friends and research school projects but it is far too expensive. Perhaps the Minister or her officials could request Telecom Éireann to look again at their charges in this area. Computers too are expensive. I welcome the Department of Education and Science's policy to install Internet connected computers in schools throughout the country. That is a worthwhile, positive and progressive step.
We should try to encourage people to purchase computers for home use, though I do not know by what mechanism we could do that. One should be able to purchase a computer at a cheaper price than applies at present. They ought to be accessible to young people in particular who, to be effective in the future, have to be modern. Keyboard and computer skills are essential for modern employment. We should encourage the purchase of computers for home and schools.
As a member of a county council – and I am sure this applies to members of local authorities – I frequently attend meetings at which people object to the erection of telecommunications masts. It is a matter of great controversy in my county as, I am sure, it is in every other county. We are now in the third age of mobile phone technology and are entering the realm of satellite phones. I am informed that mobile phones will be linked to satellites and there will be no need for masts. Perhaps people with greater knowledge on this issue will clarify that point. It is an issue of deep concern in many communities. The quicker satellite technology is available, the happier I and people in many communities will be. We need to have a benchmark in relation to how close these masts can be to existing dwellings.
I referred earlier to the fact that the launching of Aer Rianta, Aer Lingus and Coillte will be useful experience in the launching of Telecom Éireann. Perhaps the officials could let me know if there are to be any special share options for senior executives of the company. I appreciate and accept fully that workers are entitled to share options. What share options will be made available to executive directors of the company? The Minister has put the workers' position on the record and perhaps we can have that information also when it becomes available.
What are we to do with the money? The Minister has addressed this issue to some extent as did Colm Rapple of The Sunday Business Post  recently in an article he wrote about whether we should sell off Telecom Éireann. I do not have any difficulty with floating the company but it is important that we get the best price possible for it. We should think long and seriously about the infrastructural problems which exist in the realm of the Department of Public Enterprise. As that Department is the author of the Bill and will be managing this process I would like to think that a significant portion, if not all, will be used for that Department's needs. We should invest a significant amount of the money made dealing with the infrastructural problems of road and rail transport which are of great concern to the Minister, this House, the other House and the general public.
I have been a Member of this House for almost two years now. The time it takes me to travel from Drogheda to Dublin is increasing as a result of the traffic problems on that route. It is time we invested money in resolving some of those problems.
It is very important that the launching of Telecom Éireann goes as smoothly as possible. I have no difficulty saying that the chairman of the board should receive greater remuneration. That position, because of the responsibilities attached to it, should command the highest remuneration possible. It is important that we attract the best people to these positions. The sum of £7,500 is a ridiculous figure. Telecom Éireann will be the third largest company in this country when floatation has been completed and, as such, the chairman should receive a salary commensurate with the highest in the land.
This is very important legislation. Ireland is going through rapid and great change. Nowhere is that change greater or more rapid than in the telecommunications field which is the cutting edge of change. I commend the Minister's view that members of the public should have a significant option to purchase shares. I am not referring to the workers in Telecom Éireann; we are talking about Joe Soap. We should encourage shareholding by ordinary people. There is a trend towards share ownership but if one compares Ireland to America the philosophy of buying and selling shares is much more ingrained in that economy than here. I accept that the Minister is committed to ensuring every person who wishes to have an option to buy shares will be given that opportunity. That will make a significant impact on the general public. I also accept that major multinational companies will be seeking to invest in Telecom Éireann. The IPO is a great adventure for us. It is something which will be of great benefit to the company and its workers and the general public in particular.
I, and my party, wish the launching of Telecom Éireann well and hope it will be successful. This is the first of many so it is very important that the ship sails as steadily and as efficiently and effectively as it can. I look forward to the launch later this year.
Mr. L. Fitzgerald Mr. L. Fitzgerald
 Mr. L. Fitzgerald: I was very heartened by Senator O'Dowd's response. I wish to deal, as did the Minister and Senator O'Dowd, with the employees share option scheme. It is rather curious that it has received such a bashing in the media. It is disappointing although legitimate for Members of this House to table motions seeking a revision of that agreement which has already been finalised, if not signed. It is strange that KPN-Telia, which got the bargain of the century, has escaped the wrath of these scribes while the poor workers, who have put so much into the company over the years – over decades, in some cases – are the target of such venom and begrudgery.
I congratulate the Minister on bringing forward this legislation, the importance of which has been acknowledged by all. The degree of consensus that has followed the publication of the Bill is testimony to the success of the Minister in tackling an extremely complex and ground breaking move – with which I am sure the Minister and Senator O'Dowd would agree – in the history of telecommunications in Ireland. The Bill is seen as a key step forward towards the proposed initial public offering of shares in Telecom Éireann this year.
The history of communications in Ireland has been covered very well by the Minister. With the formation of the State, the Department of Posts and Telegraphs succeeded the Office of the Post Master General in attaining State control of this essential means of communication. It is only right that we take the opportunity to pay glowing tribute to the many thousands of civil servants who served over the years in the Department of Posts and Telegraphs, under successive Governments, and gave sterling and loyal service. On many occasions they faced criticism and anger from the public about decisions, policies and structures which were, to be honest, inadequate, unsatisfactory and did not respond to public needs but for which they, as ordinary civil servants, could scarcely be held responsible.
When I was first elected to the other House in 1981 almost half the representations I received from my constituents were about telephones. People wanted telephones in the late 1970s and early 1980s and almost half the people who came to my clinics were looking for a telephone. It was extraordinary and baffling, looking back at it, that the Department of Posts and Telegraphs had no strategic plan and did not have the vision to look forward to what they needed to do. As the Minister and anyone who was a Member at that time can confirm, the Order Paper was always littered with questions to the Minister for Posts and Telegraphs seeking telephones. The usual reply was that no cable was available and no commitment was ever given in reply to supplementary questions on when a cable was likely to be available. It was a luxury to own a telephone in those days.
Deputy Albert Reynolds, ably assisted by Mark Killilea, decided to confront these glaring inadequacies and to bring Ireland to the forefront of  telecommunications infrastructure. They were derided, sneered at and pilloried at that time – I recall cartoons showing telephones hanging from ceilings and car boots – for promoting a pipe dream by the so-called experts and some of the well known scribes, some of whom are still around. However, they laid the ground work for the establishment of Telecom Éireann as a stand alone semi-State body in 1984.
Developments since then have proven it was an inspired decision. Telecom Éireann became much more focused as a provider of telecommunications and related services. There was a huge cultural change in its operations, although even since then there has been a great deal of justifiable criticism directed at Telecom Éireann. Finally, we were getting telephones on demand. It is only fair to qualify that by saying the recent Ombudsman's report does not fully agree with me, in that he still finds faults with the manner in which Telecom Éireann handles applications for telephones by individuals and corporate groups. Nevertheless, the progress was phenomenal and the focus had been set.
Telecom was also building up infrastructures to take on and provide for the challenges of the new technologies, to which the Minister and Senator O'Dowd referred, thereby enabling Ireland to attract inward investment in jobs from international companies, hitherto unattainable. The company has established a world class communications infrastructure and service here. That has been disputed by some on the grounds that Telecom was not successful in one bid last year or the year before on a large international project. However, I do not accept that disputation.
Despite minor concerns and reservations expressed by a few Opposition politicians, I believe the direction taken in this Bill is the correct one. It demonstrates the courage, vision and pioneering spirit of the Minister. I am not palavering her – I believe in what I say. The strategy here, in terms of telecommunications, is very focused in the direction of strong and effective competition in the marketplace. While Europe is calling for that in any case, the Minister brought it forward earlier; this showed her conviction, determination and courage.
As an anecdotal aside, when the Minister was appointed and her Department was named the Department of Public Enterprise, some of the well known scribes wrote that that pointed to a Minister who was going to put her arms around the semi-State sector and say “This is mine – hands off”. How wrong they were. I wonder how many of those scribes have publicly admitted they were wrong. I have only read one recently who had the courage to admit he was wrong when he made those statements. I do not know if the Minister remembers reading them but I certainly do, particularly in the Sunday newspapers.
Mrs. O'Rourke Mrs. O'Rourke
Mrs. O'Rourke: Perhaps it was a Member of this House.
Mr. L. Fitzgerald Mr. L. Fitzgerald
 Mr. L. Fitzgerald: With the phenomenal acceleration in the volume and speed of exchange of knowledge and information in the global village, companies must be highly competitive to survive. The opening up of Telecom to an initial public offering of shares will significantly enhance its ability to compete in the rapidly changing communications environment.
It must be conceded that it was essential that structures be put in place in the event of competition to introduce a regime which would regulate the market in an equitable and transparent way. The establishment of the office of Etain Doyle, the Director of Telecommunications Regulation, was an essential plank in that, as well as the incorporation of EU directives into Irish law. However, like others, I was disappointed the 1996 Act, which did a great deal of good and seeks to promote openness and transparency, forgot one fundamental aspect, which was to make it obligatory in law for the Office of the Director to be accountable – as well as open and transparent – to the Houses of the Oireachtas and the joint committee. I am glad the Minister has acknowledged that and has given a commitment to rectify that deficiency in forthcoming legislation. However, it is only fair to compliment Etain Doyle who, within the context and terms of the Act under which she operates, has made herself available to the joint committee, after an initial difficulty, and has proved very satisfactory in giving an account of her services. Nevertheless, I support the Minister's decision to make that obligatory in law.
I believe the timing of the IPO will prove very effective. In the past, the company operated solely in the home market, providing essential services to the State. However, times and market conditions have changed dramatically in the past few years, with massive mergers, strategic alliances and the globalisation of businesses. All these changes require a great deal of planning and advanced international services. The growing demand for telecommunications services is no exception. It requires speedy responses from the sector to meet customer needs.
I commend the Minister's and the Government's confidence in the ability of Telecom Éireann to play a major part in this highly competitive and fully liberalised market. It is a well known fact that the company no longer needs the long arm of the State or the Minister as a protector or an intruder, not that the Minister ever intruded where it was not essential. I have no doubt it will be highly commercially successful by being allowed operate freely as it pursues strategic commercial objectives.
Telecom Éireann is already taking initiatives in this context. It was encouraging to learn in January of the company's decision to set up an office in London as part of its major international expansion programme, aimed at generating 20 per cent of revenue from abroad. I understand this office will be opened in the London docklands in May. It already has a licence for inter national operations but is seriously considering making new applications, for which it must go through the equivalent of Etain Doyle's office in London.
The company has stated it is exploring the possibility of getting into the mobile telephone business abroad and wider services. On the occasion of that announcement, it was stated the company would go after a full spectrum of business where it proved profitable to do so. It is acknowledged that the company needs to explore other business opportunities at home. It has been involved in the security alarm business and there is further potential, in both the short and long term, to expand and exploit that area.
On a related matter, there were significant achievements at home during 1998 which it is important to highlight. Employment in the tele-sector doubled in Ireland last year. At the beginning of the year, there were fewer than 6,000 people working in the tele-sector but by the end of the year that figure had doubled to 12,000. That is just one area of inward investment which Ireland attracted in the 1990s and one of the factors contributing to its success is high capacity telecommunications. However, it is widely accepted by the consumers of Telecom's services, among others, that deregulation of the telecommunications market must offer a much greater range of services than before, as well as improved access to cheap, high capacity bandwidths if we are to remain at the competitive peak. I support the Minister's decision to bring forward deregulation by one year. I also share her conviction that Ireland is in a unique position to become the European centre for advanced telecommunications services. She has taken many initiatives to ensure that happens.
The telecommunications advisory committee set up by the Minister and which reported to her on 18 November – I understand Mr. Brian Thompson was its chairman – forecast that Ireland has a unique but fading opportunity to leapfrog its European trading partners and progress to the next wave of telecommunications policy and regulations. The findings of that report are adequately covered in this Bill.
Telecom Éireann's decision to invest £100 million to develop its broad band infrastructure this year, which is only part of a £350 million capital investment for 1999, will lead to an 80 per cent increase in the availability of high speed optic fibre in the network. The Minister's determination to ensure flat Internet access rates for 1999 will establish Ireland as Europe's leader in electronic commerce. Telecom Éireann has huge potential in this area. The experts say it could get computer services across the globe. The number of people on the Internet is doubling every 100 days and represents 700 per cent growth per annum – it took radio 38 years, television 16 years and the Internet four years to reach 50 million users. It represents the fastest growing network in the history of telecommunications.
 A degree of concern was expressed about the manner in which the share offer was handled. The placing of share offers in other places was disastrous because people made a killing on the first day. I am confident the Minister does not need a lecture from us on how to handle this initial share offer. Her performance to date is clear testimony to that. While she acknowledges the presence of institutional investors here and on the London and New York stock markets, she has gone out of her way to promote the availability of large numbers of shares among our citizens. Her stated position is that she wants share ownership to become more commonplace.
Politicians have criticised the turnover of personalities on the new board. It is regrettable that there has been such a turnover but I make no apologies for it. I am glad Senator O'Dowd acknowledged that Mr. Brian Thompson had the international calibre and telecommunications expertise for the job. It was a great achievement for the Minister to get a commitment from him. However, just as it was right for the Minister to pursue him – he was successful in his short term on the subcommittee and as chairman of the board in gearing the company towards flotation – it was equally naive of some to start shouting that she should have tied him into a deal for two or three years. He was offered the position of non-executive chairman for £7,500 per annum. Do the people who make such statements live in the real world?
The issue of cronyism was also mentioned. The Minister acknowledged the contribution Deputy Spring can make as the workers' director. She approached the former EU Commissioner, Mr. Peter Sutherland, and invited him to participate on the board. Unfortunately, he was not in a position to take up that offer due to a conflict of interests. The Minister regrets that because she wants to ensure that people of international calibre are appointed.
I have confidence in Mr. Ray MacSharry, as does the media, that he will not do any harm. He has great international experience and a good reputation from the GATT negotiations and elsewhere. He will help to move the process forward. Much was made about his lack of telecommunications experience but industry sources do not consider that this is an issue. One observer asked last week whether foreign institutions which buy AIB shares know who is Mr. Lochlann Quinn? Many people on the international stage know and respect the reputation of Mr. Ray MacSharry.
During the past week politicians referred to the new members the Minister has appointed to the board on the best advice available to her consultants. They also stand up to scrutiny. The Minister sought to have the best board possible to steer the company through the initial stages of flotation. It is unfortunate that some people, such as Mr. Ron Bolger, thought it appropriate to step down. Members from both sides of the House regret his departure because of his record over a six year period as chairman of the company and  the manner in which he brought it close to flotation. Mr. Bolger made his decision and the Minister, the Government and Telecom Éireann must live with it.
I support the Minister's stance on the employee share option scheme which is a complex and difficult issue. The staff of Telecom Éireann must embrace new work practices and rights. As the Communications Workers Union document points out, there were fears of a revolt because of this flotation. However, the Minister cut them off at the pass. She realised the difficulties and put together a package, in consultation with all union interests, which was acceptable. The change of name from Telecom Éireann to Eircom is stupid.
Mrs. O'Rourke Mrs. O'Rourke
Mrs. O'Rourke: It will not change name until after the flotation.
Mr. L. Fitzgerald Mr. L. Fitzgerald
Mr. L. Fitzgerald: I am glad that common sense has prevailed and that the company will float as Telecom Éireann.
I commend the Minister for her promotion of electronic commerce. She and the Department are on a crusade to persuade the banks, for example, to change their practices to increase confidence in the safety of credit card transactions on the Internet. Telecom Éireann is in the process of setting up a multi-million pound electronic commerce service centre which will allow retailers to carry out transactions on the Internet. The Minister's decision to establish a public private partnership to enhance Ireland's connectivity to global Internet networks is part of the ongoing work at international level to ensure that Ireland becomes a European hub for electronic commerce. The signing of a joint communiqué on electronic commerce by the Taoiseach and the US President is evidence of this.
I commend this Bill and the Minister's approach to steering the company to final flotation.
Mr. Quinn Mr. Quinn
Mr. Quinn: I welcome this historic legislation. It marks a fundamental change in the relationship between the provision of telecommunications services and the position of the State in that provision. I want to focus my attention on the challenges that change presents. I echo the words of Senator Liam Fitzgerald who congratulated the Minister on the speed with which she has met that challenge.
Mr. Ron Bolger was chairman of Telecom Éireann for six years. It is a shame he is no longer on the board given his dedication, commitment and enthusiasm over those six years. We would not be at this stage if Telecom Éireann had not had the work of people such as Mr. Ron Bolger and the Minister acknowledged that.
We have seen dramatic changes over the past 18 months in this area. However, the potential of the information age is such that we must continue to move ever faster. The Minister has recognised that we must change gear. There is a danger that we could become complacent. I congratulate the  Minister on her vision particularly with regard to electronic commerce. That is an area in which we must recognise the challenges facing us and in which we must not become complacent.
The significance of this Bill is that it represents the first step in the ending of State ownership of Telecom. The State has played two roles in the past, namely, as owner and regulator – since 1996 – of Telecom. The ownership role has changed in recent years with the introduction of competition, liberalisation and the selling of shares to KPN-Telia. It was in this context in 1996 that the concept of an independent regulator for the telecommunications service was introduced in legislation. Under that legislation, the State effectively delegated much of its authority to the regulator. That was essential in order to ensure a level playing field while the State still owned one provider of a telecommunications service. It would have been anti-competition not to have had an independent regulator.
We now need to give urgent consideration to what will happen when the State gets out of the ownership role altogether. I appreciate we are not making that decision today but I was delighted to hear the Minister refer to selling all the shares. I would like to know if that is the intention. Under the proposed public offering of shares, the State's stake in Telecom Éireann will fall substantially below 50 per cent and it will no longer be the dominant player supported by strategic partners. Instead, it will be a minority shareholder in a full scale private sector company, one subject to all the commercial rigour, competition and disciplines of the stock market.
There is no long-term justification for a continuing State ownership role in Telecom. First, the State will not be able to call any shots having only a minority stake in one of the players in an open market. It could call all of the shots when it was the sole owner of the sole player but I hope those days are gone forever and with them the core rationale for ownership. Second, the issue of capital has come very much to the fore recently. In the future, Telecom Éireann shareholders will certainly be called upon to inject further capital into the company, possibly very large amounts of it. I see no reason why the resources of the State should be used for that purpose when capital can be supplied by private shareholders; the State will have far more urgent calls on its resources. Neither do I see any reason for the State to sustain a sizeable equity investment in Telecom Éireann in the long term. The State should cash in its stake in Telecom and put the proceeds to good use elsewhere. Structural funds from Europe are beginning to dry up and the State will need to inject large amounts of development capital into the economy over the coming decade. Not only will the State not need to invest further in Telecom because others will be ready to do that, it must realise any investment stakes it has to fund new developments which Brussels can no longer be relied upon to fund. There is a third  urgent reason why the State should get out of the ownership of Telecom completely. Only when the State has totally divested itself of its interests in Telecom Éireann can it play its proper role of regulating the sector and stimulating its development in the national interest. While the State still owns part of one of the players, it cannot properly fulfill that role. My view on this matter has nothing to do with ideology although I appreciate that other Members may have an ideological viewpoint on it. I am neither in favour nor against privatisation as a general principle. However, I am opposed to State ownership of any part of Telecom Éireann because I believe that such ownership in the future would get in the way of what the State should be doing.
As we legislate today for the State to divest itself of part of Telecom Éireann, we must also look to the future. Senators Fitzgerald and O'Dowd touched on that, especially in regard to the challenges facing us in the area of e-commerce. If we are not careful, State divestiture could be seen as a step towards the abdication of the State's role in telecommunications. That would be disastrous for the future of this country.
Ireland's national interest lies in seeking a leadership role in the information age and its associated challenges. It is not merely a matter of keeping up with the Jones's; our strategy should be to make Ireland No. 1 in Europe in the area of e-commerce and one of a handful of top players in the world. It is interesting to note that Singapore determined to do that two years ago. The Minister has grabbed a hold of that idea and is moving in the right direction; I hope I am encouraging her along that road.
If we get things right, I believe this leadership role is achievable, not just in Europe but in the world. Ireland's future will depend on the manner in which we do that. Doing it will depend crucially on having the right telecommunications environment in the areas of cost and quality, in particular. As far as costs are concerned, we are still not living in the real world. All the blather about how much charges have decreased is irrelevant. Compared to where we were when we could not get phones at all, great progress has been made. Charges tumble when any monopoly is dismantled. Equally, the manner in which our costs compare with other countries in Europe is not really relevant. The point is that we will never successfully establish Ireland as a world leader in e-commerce unless our costs are on a par with those in the US. That is the only meaningful comparison we can make. At the moment, we are light years away from being competitive on the basis of that comparison and we should not fool ourselves about it.
In regard to quality, it is not only important to ensure lines are clear and connections are reliable. Those are givens; one does not get people across the threshold to test a product unless one has the basics right. To compete effectively, we must have state of the art facilities. We are not yet on the leading edge and getting there  and staying there will be hugely expensive. If we want to achieve a telecommunications environment which will allow us to become a world leader, we will have to work very hard and spend a lot of money. We cannot expect an open market place comprising competing private sector companies to give us everything we want automatically. I believe in the free marketplace but if we want to be at the leading edge, an open marketplace alone cannot achieve that. It is a necessity but is not a sufficient condition. I say that as someone involved in the free marketplace. The State must intervene in this regard to regulate and stimulate the industry.
Competition in telecommunications will give us lower prices – it is already doing so. However, competition alone will not necessarily give us prices low enough to help us achieve and hold on to a leadership position. Competition in telecommunications will give us better facilities, especially facilities for which providers can charge extra. However, competition alone will not necessarily provide facilities on the leading edge, ahead of demand rather than behind it.
An absolutely crucial difference exists between companies responding to market demand and companies anticipating and, thereby, stimulating market demand. Given the enormous cost of capital investment in this area, there is a built-in tendency for companies to stay just behind rather than just ahead of market demand. The provision of broad band services is a case in point. Invest ahead of demand and one will lead the pack; invest behind demand and one will become one of the also-rans. Into which category will we fall? This is where I see the future of the State as a regulator and stimulator of the market.
The regulatory framework we put in place in 1996 – I was actively involved in influencing it – is fundamentally flawed. It was created to keep competition authorities in Brussels happy and it is not what we need now. That was only three years ago which shows how fast these matters move. At that time I argued that we needed a highly interventionist regulator. The regulator's role should not be simply a judge of competition rules, but a stimulator of competition. I did not get that message across, and it was not understood. I saw the regulator's role as essentially one of development. I lost that argument at the time but I think time has proved me right.
The Minister said in the other House that the regulator's present status – which is that she is not accountable to anybody – will have to be changed. I agree, although I hasten to add, the present regulator is doing an excellent job within the framework of the 1996 legislation. However, that legislation is inappropriate for the new era into which we are moving with this Bill.
If we were starting again from where we are now, I am not sure we would be correct in opting for an independent regulator. It might be time to bring this function back to the Department. I have not heard this argument being made before. This can only be done when the State is out of  Telecom Éireann altogether. To put it baldly, we need to put in place mechanisms by which the State can effectively play a highly interventionist role in the development of telecommunications from here on. It cannot do so through its position as a minority shareholder in Telecom Éireann. That position is about to become a liability in terms of controlling and stimulating the sector as a whole.
I welcome the Bill but I would welcome even more the Minister's assurance that it is seen by Government as the first of a number of necessary steps urgently required to be put in place. The challenge facing us is one of regulation and ownership. If the State is part-owner, it cannot be the regulator. I was pleased with the Minister's comments in addition to her speech. I have not read in the Bill that we intend to sell all the shares in Telecom Éireann.
Mrs. O'Rourke Mrs. O'Rourke
Mrs. O'Rourke: That has not been decided.
Mr. Quinn Mr. Quinn
Mr. Quinn: I know. If we are to place Ireland at the leading edge of telecommunications technology, the State needs to take an interventionist role and it cannot do so if it is a shareholder in the telecommunications industry.
Mr. Walsh Mr. Walsh
Mr. Walsh: Cuirim fáilte roimh an t-Aire agus roimh an Bille. On previous occasions when Members of the House have said that an historic and significant debate was taking place I did not always agree – thought they were exaggerating. However, this Bill is a milestone, not only in the area of telecommunications but also in the commercial life of the country. A great State organisation is being exposed to the commercial reality of the market.
The Minister mentioned that the first trans-atlantic cable was put down between Valentia and Newfoundland in 1858. Telecommunications has come a long way in the interim. In our lifetimes, Telecom Éireann has also come a long way. It is not that long since Conor Cruise-O'Brien was Minister for Posts and Telegraphs and one would get a telephone two years after applying for it and consider oneself lucky. I remember one of the Minister's predecessors, Deputy Albert Reynolds, at a Fianna Fáil Árd Fheis making a commitment that people would have telephones two or three days after applying and everybody questioned his sanity for thinking this could be achieved. However, it was achieved within a remarkably short period. I also remember the days when one had to make calls through the local exchange and it was very problematic. Making night time calls in our area depended to a large extent on whether the telephonist had been out on the tear the night before – who was on and where they had been earlier was the subject of great local jokes. Now one can dial any part of the world and get through instantaneously.
Significant changes and improvements have occurred, not only in this area but also with the  Internet, digital television and in the information technology revolution taking place. We can proudly say we are in the vanguard of that revolution, although, undoubtedly there is more to be achieved.
I agree with previous comments on the cost of telephone calls. It must be acknowledged that Telecom Éireann has made significant strides in its competitive approach to ensuring the customer gets a better deal, but there is still some way to go in that regard. The thrust must be in that direction.
The economic development we enjoy today has to some extent been predicated on an improvement in our infrastructure. If we take the areas of telecommunications, transport and roads, in which the Minister has responsibility—
Mrs. O'Rourke Mrs. O'Rourke
Mrs. O'Rourke: I do not have responsibility for roads.
Mr. Walsh Mr. Walsh
Mr. Walsh: I know that – they come under the remit Department of Environment and Local Government. We have probably accelerated our advance much more effectively in the area of telecommunications than in the other two areas. Perhaps we should apply the proceeds from the sale of this very successful company, which hopefully will be even more successful in the future, to the defective areas of infrastructure, transport and roads. I have been critical in the past of the failure to develop our road network to the requirements of a modern, developed trading economy. The proceeds and the manner in which we apply them will to a large extent determine how this Administration will be judged in the future.
I listened with interest to Senator Quinn's views on the State holding equity in this company. I sympathise with his comments on ensuring the regulation of the industry is carried out at arms length to ensure we maximise the benefit for the industry as a whole and not just this company. That is essential and it must be done in an open way. There were fears in the past that decisions might have been taken in the narrow interest of the company rather than in the broader interest of telecommunications and business, generally.
Therefore, I am not sure I fully subscribe to the Senator's idea that the State should now divest itself completely of its shareholding. It is in the State's interest when maximising its take from the investment it has made in the company over the years to maintain a strategic stake in it. It is probably too late to suggest this but I would like to have seen a mix with 25 per cent of the shares held by the State, a maximum of 25 per cent by KPN-Telia and 50 per by investors.
I agree with Senator Quinn that, whether the State holds a stake in the company in the medium term, it is absolutely essential that the industry is regulated in such a way that maximum competition is encouraged because that will provide a dynamic for the industry to grow and ensure that  Ireland is a world leader in telecommunications and is the launching pad for future economic development.
Remarks have been passed that the deal which led to the KPN-Telia strategic alliance was not good but that is debatable. However, it was imperative that overseas expertise be brought into the company. The future success of Telecom Éireann should not depend entirely on the management of its activities in Ireland. The company will become an important player in the global telecommunications sector and will not have its horizons defined by the sea that surrounds Ireland. It will look to other regions, such as the eastern bloc, the United States and the Far East where there will be tremendous growth in this sector.
Most economists and stockbrokers have targeted telecommunications as a growth area over the next decade. It would be good to see Ireland playing a leading role and one of its successful indigenous companies being a prime mover in the sector. I was concerned when I recently read that Telia may not continue to be involved in the company. There was a suggestion in media circles that KPN may end up acquiring the full shareholding to which KPN-Telia is entitled. That decision should be examined closely to ensure that any developments in this area do not, for whatever reason, inhibit the company's future growth and development. I have no doubt that the Minister, who has shown tremendous dexterity in the manner in which she has handled this issue, will deal with this efficiently and ensure that there will be a strong foundation for success in the future.
The employee share ownership scheme was discussed and I am sure Senator Ross, who has been heralded by various speakers who eagerly await his contribution, will deal with that comprehensively. The concept and principle of giving employees a significant stake in the company is absolutely correct. One may argue that they got too sweet a deal but they must adapt to the competitive edge that will pertain in future. They have built the company into what it is today and modern commercial thinking suggests that it is progressive to engage and involve employees in a company's future success or otherwise and I compliment the Minister on that.
I have no doubt that the success of the employee share ownership scheme will also be replicated by the many people who will subscribe privately. I urge the Minister to make as big a stake as possible available to private investors. It is a pity, as has happened in similar flotations, that the cream of the shareholding will go to major institutions. An increasing number of people look to the stock market because of falling interest rates. By doing so, an entirely new dynamic will be created in our economy; this happened in the United States. People in various jobs and positions will see themselves as investors in a wide range of companies and I have no doubt that Telecom Éireann will be a very successful investment for those who participate.
Mr. Ross Mr. Ross
 Mr. Ross: I welcome the Bill and, as Senator Quinn said, this is a historic occasion. A number of privatisations have taken place already but the size of this one is historic and the fact that the Tánaiste and Minister for Enterprise, Trade and Employment stated in recent weeks that she sees this as the precursor to many privatisations is very encouraging. It shows that we have come a long way from where we were five or six years ago when one political party was saying that there should be no more sales of State assets. That was a piece of doctrine which obstructed the progress of the economy, the development of semi-State bodies and reduced the opportunities of many workers in those companies.
I welcome the privatisation as signalling the thinning out and commercialisation of almost all State bodies. It will be seen as the forerunner of the privatisations of Aer Rianta, Aer Lingus, Coillte and many other companies. Some are in the Minister's Department while others are in the sanatorium and will not be capable of privatisation for a long time because nobody would buy them. However, the sale of Telecom Éireann is one for which institutions and private investors will have a great hunger and will probably go very well indeed.
I wish to ask a question which I suspect the Minister will not answer but it is very important if we are taking this step. It should not be taken simply for the ideological purposes. The State will receive a huge amount of money and, if a programme of privatisation is being embarked upon, as indicated by the Tánaiste, it should be specifically stated for what purpose this money is being raised by the State and commitments should be given that it will not be used for current expenditure.
Senator Quinn touched on this quite rightly when he said that EU funds were coming to an end and that there ought be a commitment from the Government and, indeed, Opposition parties that when these funds are realised, they will be used for infrastructural and capital purposes or simply to pay off the national debt.
Mrs. O'Rourke Mrs. O'Rourke
Mrs. O'Rourke: Senator O'Dowd and others expressed that view.
Mr. Ross Mr. Ross
Mr. Ross: It is very important that we do not go down the road of a privatisation programme and squander the money on current expenditure and buying votes. It should be specifically stated that the money will go towards capital projects similar to those for which EU funds were allocated and broadly, but not exclusively, we have a proud record on our use of such funds. My preference is to pay off the national debt but that is politically difficult because the immediate results of that are not visible, tangible or appreciated by the electorate but it would be the responsible route to take.
I welcome very much the Minister's intention to split the shareholding between the private and public investor as evenly as possible. It will  obviously be impossible to do that exactly but the important aspect of a flotation is not the day of the flotation but creating a market afterwards. The Minister and her advisers will be aware of the importance of ensuring the market does not collapse three or four days after flotation. If this happens, we will end up with egg all over our faces. The money will have been raised, but such a collapse looks bad and the result is that those holding shares will end up with a sour taste in their mouth.
I suggest that as far as possible the Minister starve institutions and give shares to private investors. Of course there will be what are called “stags”, namely, people who will enter the market for a quick profit. This might include Members of this House – there is nothing wrong with this. It is likely that these people will probably make a quick profit. They will apply for four or five times the amount of shares and receive a quarter of that amount – we do not know the basis of the allocation. The classic pattern of privatisation is that the share price will reach a premium at which point the “stags” and some of the institutions will leave the market. The worst thing that could be done is to completely satisfy the institutions on day one and leave no hunger for shares afterwards.
I think the Minister's intention is not only good in political terms but is also good in practical terms. The important thing is to ensure institutions are not allowed dominate. The majority of private investors with holdings up to £10,000 will not be looking for quick profits but will regard the purchase of shares as a long-term investment. On the whole privatisations, particularly in the telecom sector, have exactly fitted this pattern. They have proved good long-term investments because of the nature of privatisation which demands commercial activity and behaviour from the board and the people who manage the company. This is why a new board was so necessary, although this is no reflection on the previous board. Shareholders will hold on to shares in the long-term as such privatisations are marked by the movement of companies from a non-commercial to a commercial basis, thereby becoming a good long-term and short-term investment.
I will not be voting against the Bill, but I fundamentally disagree with the allocation of 14.99 per cent of shares to workers. This is the most generous package I have ever come across, commercially or politically. Senator Fitzgerald said that without such provision there would have been a revolt. That is the whole point. If people such as the Senator say such things, then there will be a revolt and we will have to give in to people making these sort of demands. I am very glad Senator O'Toole raised this point.
Mr. O'Toole Mr. O'Toole
Mr. O'Toole: On a point of information, it is such utterances by people like Senator Ross which cause revolts.
Mr. L. Fitzgerald Mr. L. Fitzgerald
 Mr. L. Fitzgerald: People like Senator Ross promote revolts.
An Cathaoirleach An Cathaoirleach
An Cathaoirleach: Senator Ross has only a minute and a half remaining. Senator O'Toole will have an opportunity to make his contribution.
Mr. Ross Mr. Ross
Mr. Ross: I will be looking for injury time.
An Cathaoirleach An Cathaoirleach
An Cathaoirleach: The Senator has earned very little injury time.
Mr. Ross Mr. Ross
Mr. Ross: We are told that one of the reasons given for this extraordinarily generous package, the value of which we do not know as we do not know how much will be raised, is that workers in Telecom Éireann are going to give up all their bad practices. However, they should not be paid for giving up their bad practices.
Mr. L. Fitzgerald Mr. L. Fitzgerald
Mr. L. Fitzgerald: The Senator has a truncheon in his hand.
Mr. Ross Mr. Ross
Mr. Ross: There should not be bad practices among workers in any event. I deplore the fact that no politician from any political party is standing up against this package. None of them has the gumption or backbone to say this is too much – everybody knows it is. The danger is that this allocation sets a standard which I believe is unprecedented in terms of privatisation—
Mr. O'Toole Mr. O'Toole
Mr. O'Toole: Hear, hear. I say well done to the Minister.
Mrs. O'Rourke Mrs. O'Rourke
Mrs. O'Rourke: It is a good standard.
Mr. Ross Mr. Ross
Mr. Ross: It is setting a standard in terms of Aer Lingus, Aer Rianta, Coillte and other such bodies. We are threatened with a revolt by people such as Senator O'Toole of whom everybody in the country is scared. If he is not leading the teachers he is leading the workers in Telecom Éireann and people always give in to him. It is time people said to Senator O'Toole, “We have had enough of you; we will not be interrupted, bullied or pushed around and we will not pay you off any more”. This holds out great dangers for people and the taxpayer in the future. If the taxpayer realised what Senator O'Toole is costing him he would kick him out and get somebody else.
Mr. O'Toole Mr. O'Toole
Mr. O'Toole: The taxpayer would double his salary.
Mr. Ross Mr. Ross
Mr. Ross: He would tell the teachers to go somewhere else. One of these days, the taxpayers will tumble the Senator and he will not get any more money for the teachers, ICTU or anybody else.
Mr. O'Toole Mr. O'Toole
Mr. O'Toole: It was easier 100 years ago when the workers did what they were told.
Mr. Ross Mr. Ross
 Mr. Ross: The Senator is a menace and he knows it.
Mr. L. Fitzgerald Mr. L. Fitzgerald
Mr. L. Fitzgerald: The days of using truncheons are gone.
Mrs. O'Rourke Mrs. O'Rourke
Mrs. O'Rourke: Senators have become very robust.
An Cathaoirleach An Cathaoirleach
An Cathaoirleach: Senator Ross should not invite interruptions. The Senator's ten minutes are up.
Mr. Ross Mr. Ross
Mr. Ross: Neither should over-generous options be given to management, something on which I have campaigned over a number of years. One of the great dark clouds of privatisation, and one of the great financial scandals which spoilt privatisations in the UK, is giving outrageous options and rewards to people who have done nothing to deserve them. The Minister has done extremely well to date and if she wishes things to run smoothly following privatisation I suggest she give no options to management in the initial year or two of the flotation so that no one ends up with a sour taste in their mouth. Second, she should ensure that subsequent to the flotation there is a good, solid market in shares, something which is more important than the position of shares on the day of the flotation.
Mr. J. Cregan Mr. J. Cregan
Mr. J. Cregan: At this stage it is difficult to make an original contribution as we have had very positive and eloquent contributions from all sides. I welcome the Minister and commend and compliment her on progressing the Bill to this stage. She must be admired for the consultation process she embarked upon. She has worked extremely efficiently and speedily to bring the matter to this stage.
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 and 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. I am proud to have worked in the Department of Posts and Telegraphs and Telecom Éireann for the past 20 years. Many of us spent our time making excuses when services could not be provided as the necessary finance was not available. Successive Ministers and Governments had to preside over this – I am not blaming anybody in particular.
Telecom Éireann was established in 1984. A huge capital investment, secured by Deputy Reynolds and others, was made by the Fianna Fáil led Government. My colleague, Senator Walsh, recalled that we were told at the time that telephones would become available almost on demand, something we did not believe as the waiting time for the installation of a telephone was up to eight years, something which was totally unacceptable and very bad for business.
 Telecommunications in Ireland has entered a new era, and the challenges which Telecom Éireann will face will be no less demanding that those it has faced to date. All companies face massive challenges and competition. Despite the winds of competition which have blown around Telecom Éireann for some time, it is still the largest and majority provider of fixed line telephones and is the clear market leader in mobile telephony. At times staff have had to work under extremely difficult conditions and it is only proper that they should reap the reward of ESOP which has been agreed in a very efficient manner.
Requests were made at our parliamentary party that the ordinary punter be able to purchase shares. The Minister reassured us on this matter then, yesterday in the other House and today in the Seanad. I welcome that on behalf of the public and the staff.
Attitudes had to change 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. Changing attitudes and work practices is a major problem in any organisation. Senator Ross mentioned bad practices but I do not agree with him. I agree there have been changes in work practices which were necessary and to which the workers were prepared to agree. The old Department of Posts and Telegraphs had been doing things the same way for 50 or 60 years, and asking staff to change work practices was difficult because it was seen as a threat to their security of employment. However, Telecom Éireann is now a customer orientated organisation with an awareness that the customer must be kept satisfied. That is important because it must be able to provide the services business and residential customers want.
Up to the early 1980s there was no possibility of getting financial services companies to locate in Ireland because of the poor telephone and telecommunications 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 now one of the major factors in determining whether a company will locate here. It is vital for the survival of any company.
The workforce has made significant sacrifices and people who were Civil Service orientated had to become customer orientated. They had no doubt that Telecom Éireann could not exist in isolation. It went from a protected environment to a liberalised one. In the liberal and global market with well resourced worldwide players in the era of the telecommunications revolution, the board, the management and the unions realised it was necessary to amalgamate or the company would not survive. They have already made this decision with their strategic alliance. However, this was not easily achieved, and I pay a special tribute to Mr. Con Scanlon, the general secretary of the Communications Workers' Union, to his predecessor, Mr. David Begg, and to the manage ment and staff of 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 any of us.
Mention was made of the public, and I would love to see it being accommodated by being given the option to purchase shares in the company. The public must be applauded for the manner in which it has stood by and supported Telecom Éireann over the past number of years, especially in times of intense competition. I believe the public will continue to do so because Telecom Éireann is and always will be the best in the business. It can provide the best services and, most importantly, maintain them. Telecom Éireann will always be able to do that while it has telecommunications staff in every town and city in the country. That is most important from the point of view of the public.
The Bill is necessary to ensure the company is privatised as stated in An Action Programme for the Millennium and it is 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 have pride in it.
Other speakers referred to the ESOP deal. It is important we know the facts. The Minister read a factual letter from the Communications' Workers Union and I feel obliged, because of the comments of the previous Senator, to again put this on the record and to welcome the factual account I received and which I am sure the Minister and all others in the House received from Mr. Con Scanlon. The coverage this issue has received recently is scandalous both from the point of view of the Minister and of the workers in Telecom Éireann. A certain element has set out to embarrass both sides. When the facts are placed before the House, I expect Senator Ross might have a change of heart. He called on the Minister to revise the terms of this deal, but she knows the facts and the deal will not be revised.
The ESOP involves the acquisition by the employees of a 14.9 per cent shareholding: 5 per cent arising from the changes proposed in the agreement between the company and unions – the Telecom Éireann partnership – and 9.9 per cent to be bought and paid for by the employees. That gives the lie to Senator Ross's 14.9 per cent handout to workers. The release of the 5 per cent shareholding is scheduled to occur in three phases: agreement on the monitors and measures for transformation; verification that transformation is forging ahead and that relevant targets have been achieved, and the transformation agreement contains some of the most radical work practices and flexibility changes ever proposed and is designed to deliver £110 million per annum in cost savings.
The purchase of the 9.9 per cent shareholding is being funded according to the following sched ule: 5.3 per cent pension contribution by staff, which our advisers value at £200 million if permanently continued, and the company has made a £100 million contribution to the ESOP trustee on foot of this contribution; forfeiture of the annual bonus scheme which was important to employees of Telecom Éireann; and the raising of a £95 million loan by the ESOP trustee which will have to be repaid from dividends received on the 9.9 per cent shareholding.
The ability of employees to call for their shares is constrained by the following provisions: the 5 per cent shareholding is available for distribution to employees after five years should they so desire; the 9.9 per cent shareholding is not available for distribution while the £95 million loan is encumbered. It is estimated that repayment of the loan could take between seven and ten years. That is a different situation from the one previously outlined.
I support the deal and compliment everyone concerned. The Communications Workers' Union set out in 1996 to acquire a 14.9 per cent shareholding which unfortunately took two years to achieve. I compliment the Minister for taking the matter by the scruff of the neck when she came into office. We eventually saw the 14.9 per cent shareholding being acquired in the spring of 1998. I compliment the Minister on my behalf and on behalf of the staff in Telecom Éireann, the members of the Communications Workers' Union and the general public for bringing the Bill to this stage. I wish her well with the remainder of its passage.
Mr. O'Toole Mr. O'Toole
Mr. O'Toole: I had intended speaking at length about the service given by Telecom Éireann but it is important to deal with the issues raised by Senator Ross. I compliment the Minister in progressing the matter and bringing it to this stage. It does not surprise me nor should it surprise any Member that Senator Ross would have difficulty with it because he is the last surviving voice of the oligarchy in the State. He speaks for things as they were before we gained independence and control and before workers could cope with figures of more than £100. He represents those people who think they have power – the squires, the gombeens, the landed gentry and the bankers. They will not be applauding what the Minister has done but they no longer run the country. The Bill is how Members want to see matters progressing.
It is slur for Senator Ross or anyone else to downgrade either what the workers in Telecom Éireann have been trying to achieve or what the Minister, the State and Government have been trying to achieve in dealing with them. I sat for long hours late into the night in Government Buildings three and six years ago when this matter was raised by the previous general secretary of the Communications Workers' Union, Mr. David Begg. Neither he nor his successor, Mr. Con Scanlon, was seeking handouts, rather a commit ment which would involve a share in what had been achieved by the sweat of those workers and options, which are what Senator Ross in his previous existence bought and sold on behalf of many people.
Months and years of time and energy of the Department, Ministers and trade unions have gone into this. A good number of years ago, when money was money, the Communications Workers Union invested almost £100,000 in engaging international American based consultants to look at the proper way forward for the privatisation of Telecom Éireann. The consultants were not asked to produce a document to be used in negotiation but were asked to produce a report setting out the position and which offered a basis for moving forward. Rather than be critical of the union and other smaller unions who were also involved, we should see this as a model.
The Minister, her predecessors and the Department have all worked on this matter. The Minister is to be commended for introducing this legislation. She is doing something the UK and Europe have failed to do. No other country in western Europe could produce such legislation with the support of the trade union movement and the trade unions involved. In ten years of partnership here people have found an understanding of each other's point of view and have moved forward.
This is not privatisation, which is what Senator Ross wanted, but sharing. It entails devolving the company from the Government to the people. The workers are only a small minority, nevertheless it is the way to proceed.
This kind of privatisation has been driven through a process of consultation and discussion where management and the Government recognise that workers will bring their brains to work, that they have a point of view and an added value which can gain monetary reward in terms of gain sharing, share options, etc. The world recognises this is the way forward. It is the only way we can move from the traditional to the new, by protecting people in a fair, honest and open way.
Years ago, when people looked after themselves, nobody ever got to hear what went on behind the scenes in many of the interactions between the major financial institutions and companies. Much of that is beginning to emerge in other places. By contrast, this is an open operation where we will have a telecommunications service of which we can be proud, workers of whom we can be proud and a company which is a European leader in its field.
I compliment the Minister for the brave stand she took approximately 16 months ago in advancing the deregulation, because for the previous 15 years a debate was held in a vacuum between nationalisation and privatisation. People were very comfortable in supporting views, expressed by Senator Ross in this debate, on the one hand and the trade unions on the other. They spent their time talking about privatisation versus public ownership. Many people in the trade union  movement misunderstood the position because we have finally concluded that it is not in the interests of the workers or taxpayers that any service should be a drain on the community if it does not need to be so. In consequence, we have introduced competition.
I have always said it is not a matter of privatisation being bad and public ownership being good. Those working in a company do not spend their time worrying about which “ism” they should subscribe to. They want a good service at a good rate and the taxpayer to get the best out of it.
We must all recognise that there is no argument against competition. This includes people like me who supported State ownership and the semi-State sector in its place but not to the exclusion of all else. Competition helps services. If the debate had been moved on from privatisation 15 years ago to the issue of deregulation and the introduction of competitiveness we could probably have progressed matters more quickly. Unfortunately we were ten years too late getting involved in that debate. Nevertheless, we are the first in Europe in terms of bringing along the workforce. That is extraordinary.
The deregulation and privatisation of aspects of the public sector in the UK, such as water, trains and gas, has been one disaster after another. The UK has almost the most expensive electricity in Europe. It is far more expensive that it is here, which is an answer to those who believe that privatisation is good while public ownership is bad. That is not the issue. The issue is to get a good product at a good price at a fair return to the taxpayer with a Government and people who support what is being done.
This legislation will not explode in our faces in two years time as was the case in some instances in the UK, where trains ran off the tracks and where there was no money to mend leaking water pipes. By contrast, successive Governments have worked with the workforce to get this company to operate at the top echelons of its industry. It is providing a superb service of which we can be proud. I commend the Minister and her Department.
This kind of approach allows workers to trust in Government and a partnership with management. That is alien to Senator Ross. It was easier when we fought each other, when everybody knew their place. The Senator should realise that people do not know their places anymore. They have views of their own and they are beginning to talk back. They have ideas about their product and their services. That is the way we are proceeding.
I built my house 16 miles outside Dublin at Kilsallaghan, where I still live, in 1971 at a time when people had to make representations and were willing to pay to get their name up the waiting list for telephones. I received a letter from the then Department of Posts and Telegraphs delivered by a postman, an employee of the Department. It advised me that officials would be happy to meet me to talk about my telephone but they did not  know where I lived. People employed in posts did not talk to those employed in telegraphs. We have moved on from then. I compliment all concerned and wish the Bill well. I look forward to supporting it.
Mr. Gallagher Mr. Gallagher
Mr. Gallagher: This has been a lively, interesting and generally well informed debate. Second Stage of the Bill in the Dáil was taken on 18 February. My late colleague Pat Upton contributed to that debate.
Mrs. O'Rourke Mrs. O'Rourke
Mrs. O'Rourke: I mentioned that when the Dáil Committee Stage was taken.
Mr. Gallagher Mr. Gallagher
Mr. Gallagher: When one recalls that it was only shortly after that debate that he passed away suddenly, it puts into perspective the many issues on which we get worked up.
I support the general principle of the Bill but I will table amendments for the further Stages. I support the way in which the share option scheme was put together. I compliment everybody involved, in particular, the Communications Workers Union, both under the current and previous leaderships, which had the foresight to look at what was happening in the wider world in the area of telecommunications and to engage with the Department and the Minister on this subject.
It is a matter of regret to me that the dealings on this issue were not concluded under the administration of the Minister's predecessor. I wish to share in the compliments which other Members paid to the Minister for the way in which she took this issue in hand early in her term of office and got it resolved satisfactorily.
It is a good deal. The workers have had the courage to invest their own money in their own enterprise. I wonder how many workers in other companies, whether public or private, would feel such confidence in their contribution to their own enterprises and in the overall management of their enterprises to be prepared to invest their money in it. It is not novel or bad value to use part of a shareholding to negotiate fundamental changes in work practices and methods.
I hope this scheme which is being put in place in Telecom Éireann will serve not only as a model for other companies in the semi-State sector but also as one which can be examined by companies in the private sector. We hear many clichés about partnerships, new eras, etc., but this is a new era and I am confident the scheme will work. I know of the hard work done by the members of the CWU in educating their members and bringing them on board.
The use of this model by companies in the private sector is a topical issue at present, particularly as the social partners are facing the prospect of a new national agreement. There is a great deal of dissatisfaction, particularly in the private sector, that the aspirations and objectives set out in the current national agreement to encourage worker participation and the involvement of staff in their enterprises have not been achieved to an  appreciable extent. I hope this model can be used not only by companies in the private sector but also by the social partners when they consider the next national agreement.
I want to raise with the Minister the new area of regulation which will become more important in the years ahead. Anybody listening to the debate in respect of these types of companies realises it is moving from a question of ownership to one of regulation which ensures that the public interest is achieved. There is merit in considering the setting up of an overall regulatory commission with regulators working collectively on overall policy but with separate directorates for each industry, such as telecommunications and electricity. The British experience of individual regulators for individual industries without great co-ordination between them shows that an overall regulatory commission would be worth considering.
There must be clarification of the respective roles of Minister and regulator. Already, there is confusion, particularly in the telecommunications area, concerning whether the Minister or regulator is responsible for a particular matter or policy direction.
The regulators or a regulatory commission should be accountable to these Houses. The rules must be clearly defined and updated as required by the Legislature. There should be regular assessment of the powers of regulators by the Oireachtas through a specialist committee of these Houses. That committee should be well resourced, it should have research and technical back up and it should have close liaison with the consumers, whether they be consumers of electricity, telecommunications services or other services. Clear rules will mean that public enterprise is better able to make decisions. It will spur efficiency and ensure that the social goals are achieved by all companies in the industry.
With regard to social goals, I want to raise with the Minister a concern which has been raised with me by people living in more isolated parts of Ireland regarding equality of service in a liberalised telecommunications market. Councillors who are involved, for example, in Gaeltacht co-operatives in Connemara and Donegal tell me they have difficulty getting Telecom Éireann to provide them with high quality ISDN lines and other such technology. If we are to meet the objectives on rural development to which we all subscribe, it is important that the various operators be required to offer the highest quality service to people in all parts of the country. If we do not ensure that is the case, the decline which many of these areas are experiencing will be exacerbated in the future. We have an opportunity in legislation like this and in the rules we set for the regulation of these industries to ensure that there is equal access to services in all parts of the country.
I am also concerned with Esat's cherry-picking of land line customers. I have not examined their  offer closely but, having listened to advertisements on the radio, to state it is prepared to offer a person a service provided his or her bill is £100 per month or more is not providing equality of service, particularly from a company which does not recognise trade unions. Esat could learn from the experience of Telecom Éireann in allowing the staff to be represented by a trade union such as the CWU and then engaging that trade union in the proper development of the company. I want the Minister to respond to those points.
I want clarification also regarding the public offering. The Minister spoke at length in her contribution about what she hopes to achieve through the public offering, that the public will benefit and that share ownership will be diffused widely in society. However, that was also the aspiration of the British Government when it introduced privatisation and we found quickly that the institutional investors bought up the shares which were put on offer. In recent years we have seen in the flotation of publicly quoted companies in this country that what was advertised as wide and diffuse public ownership, with the customers and the members of the public being able to buy large numbers of shares, quickly became a market where the institutional investors gained a firm foothold at an early stage. I would be interested in hearing the Minister's proposals for the initial public offering to ensure that in the long term it is the citizens who will benefit from the flotation.
The other area about which I have questions relates to the investment of receipts of the flotation. Given the reports which are now to hand from bodies such as the ESRI and given the future reduction in the amount of Structural Funds for infrastructural development, it is important that the proceeds of sales like this are dedicated to infrastructural investment in the public interest. We should set ourselves a basic principle, that the investment of receipts from this type of sale must be additional to the usual planned investment of the Government under the public capital programme. We are now learning quickly that, even though unemployment and under development posed major challenges in the past two decades, development and perhaps over development is posing equally strong challenges. Public infrastructural investment is required to cope with that. I hope the Government commits itself to investing these receipts in a good infrastructural programme, using the money as an additional sum over and above the public capital programme.
I welcome the fact that the Interception of Postal Packets and Telecommunications Messages Act, 1993, is to be extended to other operators in the sector. I took an interest in that Act when it was being debated in the Lower House because at that time the only operator, Telecom Éireann, had a centre in Portlaoise where members of staff were occasionally asked by the Garda to furnish certain records. It was a matter of concern to the staff that this should be done in  a proper statutory fashion. The Minister of State at the Department of Education and Science, Deputy O'Dea, was the junior Minister who took my amendment. I will never forget it because I had not been long in the other House when I, a Government Deputy, tabled an amendment to a Government Bill and for that I was nearly shot. I compliment the Minister of State for accepting the amendment in principle and introducing his own on Report Stage which covered my concerns. I am delighted those provisions will now be extended to other operators.
As regards partnership and worker-directors, I am glad the Minister has outlined the ongoing contact she is having with the trade union movement. I hope an amicable solution can be reached. We all recognise the importance of social partnership. It is important we look at employee participation, not just at board level but at every level of the enterprise. I know Telecom and union staff are working very hard at that. The involvement of workers at enterprise level must be a natural expansion of the strategy of partnership.
I am concerned about the elimination of worker-directors through privatisation. Unless it is handled sensitively and in full consultation with the trade union movement, it could be a retrograde step, although I know the Minister would not intend that. We must be careful that what is put in place ensures the workers have strong representation at board level and at every level of decision making in the company.
Such participation has recently been expanded into the private sector in about 250 multinational companies in Ireland, with the establishment of European Works Councils. This must be expanded further in all enterprises, given a sound legislative basis and must not be rolled back. In addition to representation at board level, sub-board participation, collective shared ownership and other innovative participative structures and processes must be developed rapidly in this area of globalisation to deepen the participation process.
I hope the Minister will report to us on an ongoing basis as regards her discussions with the trade union movement. I hope that, as with the share option scheme, whatever arrangement is arrived at, by way of agreement and consultation, in Telecom Eireann, will serve as a model for worker participation in other enterprises, both in the private and public sectors in the years ahead.
Mr. Mooney Mr. Mooney
Mr. Mooney: This debate has been wide ranging and comprehensive. There are a number of points I will raise. The Minister is always a welcome visitor to the House, having spent some of her early political career making a distinguished contribution here. I take the opportunity to express our appreciation for the manner in which she has handled this process, not only in the difficult negotiations in the early stages. It is strange how people seem to forget that acceptance by trade unions and the staff of Telecom Eireann of  this concept had to be worked for and negotiated. It is a tribute to the Minister's negotiating skills and patience that not only was she able to see these negotiations through to a successful conclusion, but that the workforce of Telecom Eireann are now enthusiastic supporters of the concept of flotation.
I have no doubt the Minister will clarify my concerns, which have been raised throughout the debate. I welcome the public statements, and perhaps the Minister will take this opportunity to clarify the position, that upwards of 50 per cent of the flotation will be available to the public. The Minister will be aware I raised this issue in another forum, primarily in the context of what happened in previous flotations in the private sector last autumn. On the one hand, there was a rush to float in the public sector by a particular company, not only against economic advice but also the prevailing conditions in world stock markets. Consequently, the directors did quite well but the public did not do as well as might have been expected. That is why there seems to be a suggestion that in the world of finance, which has its own complex rules, institutions have more than a passing interest in what goes on and that in some instances, they bring a partisan influence to bear on flotations.
The Minister has already made it clear she is in control of this process and I have every faith and confidence in her ability to ensure she will not be browbeaten or phased by the institutional investors, who obviously see this flotation as yet another opportunity to make a great deal of money. That is why I have always thought the public should be given as large a percentage of the flotation share options as possible. I am not so naive as to suggest that institutional investors do not have an important role to play. As these shares will be floated outside the country on other exchanges, the institutional element is important.
The reason I and others are anxious about public involvement is that Ireland does not have a shareholding tradition, unlike other countries. For example, America has a longstanding shareholding tradition. My superficial analysis of that country is that the ordinary five acres, as we call them in my part of the country, tend to put their money into stocks, shares and bonds rather than traditional savings accounts as we do here. It is unhealthy for this economy that so much money is tied up in fixed interest accounts – I am not sure what the figure is but occasionally it emerges in newspaper articles that it is billions of pounds. This contributes nothing to the economy but rather contributes largely to the continuing upward profits of major banks and building societies.
Sometimes people do not fully understand the financial sector. I hope this process, in which the Minister is involved and the beginning of which we have yet to see in the next couple of months, will inform and educate people of the value of holding shares in a publicly owned company  guaranteed by the Government. There is no guarantee in shares; it is a risk venture capital investment. However, anybody who knows anything about shares knows that telecommunications shares are blue chip. Telecom Éireann will be among the top six companies on the Irish stock exchange. It will be a blue chip share and although one will not be able to guarantee a return, on the evidence so far, it is a good investment.
That is why I hope the orientation of the flotation – and the Minister will have a direct input – will inform, educate and encourage people to buy shares, rather than simply pointing out that there will be a flotation and shares will be sold at a particular price. Irish people need to be brought along on this. I would welcome more information on why they should consider buying these shares, relative to other modes of saving. Increasingly, due to the state of world economies and given that we are in a low interest regime which looks set to continue for a considerable length of time, it is no longer practical for those of us with a few bob to put it into a normal bank account where one gets 0.5 per cent or 1 per cent interest; there was a time when one got more.
I know that inflation has come down, and relative to that one can still get 3 or 4 per cent interest on medium to long-term savings. However, one would need a considerable amount of money to do that, about a minimum of £5,000. For the ordinary investor saving a few pounds a week as a nest egg, there are no attractive options in traditional savings accounts. Perhaps I am labouring the point, although I do not wish to, that there should be an information campaign on the reasons the general public should buy these shares.
Although the Minister has not said when the flotation will take place, she will obviously be attuned to the prevailing conditions on the stock market. That is the way it should be. I hope she will get the timing right but a crystal ball would be needed in that regard. I do not think even the most successful financial genius or the consultants, with their millions, would be able to point to a calendar and tell the Minister that is the day. I hope that when the decision is taken there will be an acute awareness of timing and that we get it right. It goes back to the fundamental point that the money which will be generated by this flotation is monopoly money. If we look back over the years of Government income generation I do not think it would compare with the amount of money the Minister's initiative will generate.
Mrs. O'Rourke Mrs. O'Rourke
Mrs. O'Rourke: I will not get it.
Mr. Mooney Mr. Mooney
Mr. Mooney: Unfortunately, the Minister will not get it but at least it will be a permanent legacy of her contribution at an important time in our economic development. She will be seen as the political master of a Department overseeing a  process which will generate the sum of about £2 billion.
Mrs. O'Rourke Mrs. O'Rourke
Mrs. O'Rourke: I will be Mrs. Moneybags.
Mr. Mooney Mr. Mooney
Mr. Mooney: I hope the Minister will use her influence in Cabinet to ensure the money is spent within the Objective One status regions where we will gain some slight advantage. We all accepted there would not be a major sum of money but I hope serious consideration will be given in that regard.
Senator Gallagher referred to additionality. A significant proportion of that money will be spent on infrastructure development in the Objective One areas. I know the Government is committed to use the money to make up for the shortfall in the Operational Programme 2000-6 and I understand it has gone public in saying this money will be used wisely in the economic development of the country. I am making a parochial pitch that there should be a balance in favour of funding for important infrastructural development in the Objective One regions. As the Minister comes from one of them, or the verge of one, she will have more than a passing interest. I wish her well in this project. While she will not gain financially, she will gain the well earned plaudits of the broad mass of the people. I hope this process will result in more people owning shares because thereby they will own a part of the country in which they live.
Mrs. O'Rourke Mrs. O'Rourke
Minister for Public Enterprise (Mrs. O'Rourke): I thank Senators for their contributions. As I have always said about the Seanad, the debate proved lively, interesting, informative and provocative. I do not think one can look for any other attributes or characteristics of a debate giving rise to sustained interest by Members of the House. I particularly thank those who stayed from the beginning of the debate and spoke, listened and observed. There is no doubt, without running down the contributions of the Lower House which were profound and led to two accepted amendments on Committee Stage, the freedom of the Seanad allows a much more intimate and robust debate. I find it helpful that the seating is close and everybody is near.
I would be glad to give a written response to some of the precise questions which arose in the course of the debate to which I was not able to respond. The question of what happens the proceeds should be addressed. They do not go to my Department, but to the Minister for Finance. The Minister and the Government then decide what happens. There are pension overheads which must be attended to also but that is another day's work. I appreciate the good wishes of Senators for the Bill. The involvement by elected people in wishing it well and in moving it forward is welcome.
There is no doubt that we need the shares of citizens and institutional houses. Financial institutions are needed to purchase, otherwise we  would not get enough of the block or a good input to it. I am determined there should be an equal participation by citizens in that share process.
People have slightly more money now – perhaps not enough – and I would like to think that ordinary people, perhaps in their kitchen at night, while talking about their children, their lives and so on would say there is a lot going on about Telecom shares and think about purchasing a share or two. I would like to think the same of a businesswoman who asks why she should not buy shares. There is a mystique about shares. Very few of us have them – I have not. Many speakers said we came late to all the processes. The fact that we came late is good because it enables us to learn from the mistakes of others and we can decide to do it in a more beneficial way. I do not want the mystique to increase.
Senator Mooney is correct in that we had a long debate at the parliamentary party meeting and I gave a commitment to seek to have at least an equal 50-50. A document yesterday stated that but then went on to state 60-40. All parties want equal participation by citizens of the land in purchasing shares in Telecom. They have put up with waiting for phones for a number of years, sometimes with a faulty reception, service and so on. I wish to encourage the participation of citizens in share ownership in a non-mystique making way. To that end, Senators asked how people can be made aware of the shares. It will have nothing to do with weighty advisers or me but very soon we will have an awareness campaign which will heighten the awareness of how one goes about purchasing shares and where one goes to register for them. We will have the registration of interest forms in all post offices. People can register their interest in share purchase and no condition will be attached.
When it was put to me that the registration of interest forms were only going to be in financial institutions, I inquired about post offices; there is one in every hamlet in the land. They will be in every post office and in financial institutions. There will be various awareness campaigns but the awareness campaign will heighten interest. Telecom Éireann is not changing its name until it decides later. Having spent years with its logo, uniforms, vans and notepapers, the proposal to change its name was the daftest thing I have heard. One would have been faced with purchasing shares in “Eircom” and would have had to explain that “Eircom” was formerly known as “Telecom Éireann.” That would have proved to be a task beyond any media adviser's abilities. Telecom Éireann is to change its name at a later stage but that will be its business. It will be out of my remit then and it will be entitled to do so if it wishes.
I am delighted we had a robust debate on employee share ownership. I wondered this morning how I was going to approach this issue. It was not included in my script – departmental officials are very careful and do not wish to have  any fuss. I decided to bring the letter from Pat Scanlan with me and read it into the record.
Senator Ross has a right to express his opinions – I would not go as far as Senator O'Toole did on this, although I thank him for his fine remarks. Everybody has that right; indeed that is why we are all here. The Seanad is diverse in its membership and inclinations and Members are entitled to raise such matters. Senator Ross expressed his point in his usual robust way. Other media commentators chose to call the employee share ownership a hand-out. It represents quite a risk for a union to raise a loan of £95 million repayable over ten years. It requires entrepreneurial skills of the highest order. It was also suggested employees would surrender their bonuses and pension schemes. That raises difficulties for other companies who do not have pensions etc. Those who came from the Department of Posts and Telegraphs are the only staff which came from Civil Service status to the public domain and they had something to market, so to speak – they surrendered the surety of their pensions and bonuses. None of the media reflections which chose to denigrate the ESOP commented that they had borrowed £95 million nor did they comment on the strategic partners' purchase price in 1996. The robustness of this Chamber is evident from our ability to listen to different views. It would be wrong if everybody's view was the same. I welcome the heated debate which took place.
An information campaign will take place. We will sell at the end of June or the beginning of July depending on the markets. The markets are volatile and if Telecom Éireann's shares dropped internationally we would not sell. I was very taken with Senator O'Dowd's point that this is an adventure. It is a combined adventure as we move from protectionism to a competitive regime and deal with the challenges which face monopolies. We will deal with them one by one and not in a helter skelter fashion. We are doing so because it is better for consumers, taxpayers, workers and the market environment in which we live and not from any ideological bent. We can learn from the ills of privatisation in the UK which created fat cats, bad service and discontented employees. The value to the UK was not what it might have been had it been approached in a more careful way.
This process began with previous Governments through 1995 and 1996, the involvement of strategic partners and has been inevitable ever since. The idea to bring forward liberalisation was the right one – what was right in 1996 was not necessarily right in 1998.
Several Members spoke about regulation. I do not know if a ragout of regulators, so to speak, will do any better than separate ones. Ms Etain Doyle is a very fine woman, and despite the fact she was not compelled by legislation to do so she went before the Joint Oireachtas Committee. We will have to rectify that matter – one cannot have regulators all over the land who are not  responsible to anybody. People complain about politicians but we must go to the polls seeking affirmation of people's faith in us. Regulators do not and are not answerable to anybody. That is unacceptable.
Senator Quinn said that regulation must change with the environment so that the regulator keeps pace with the market and does not become a static entity. That point was also made by other Senators. Regulation is an interesting concept. The idea of having an overall regulatory body to which each regulator would be affiliated as he-she was appointed has been raised with me. That seems a somewhat cumbersome mechanism and would be an overlay of bureaucracy. I have not reflected on it to date although I will do so at a later stage.
I have not dealt with each point raised. I regard this morning's debate as a fine adventure. We cannot embark on this journey from protectionism without encountering hiccups and bumps on the road and dark patches around corners. To think that we could do so would be to live in a fairytale land. I envisage that as we embark on these adventures together there will be many difficulties and challenges. I am mature and realise that such an endeavour cannot take place in a set pattern and that I face a lively time ahead. I look forward to the adventure. I thank everybody for an interesting, lively and productive debate which will have a very strong bearing on how my Department and I reflect on this matter.
Mr. L. Fitzgerald Mr. L. Fitzgerald
Mr. L. Fitzgerald: I thank the Minister for her enlightening elucidation on the many issues raised. She did so in the finest of style with the greatest clarity. I thank her for her courtesy and openness. We thank her for being with us this morning for such a long time.
Mr. O'Dowd Mr. O'Dowd
Mr. O'Dowd: I would like to be associated with Senator Fitzgerald's remarks.
Question put and agreed to.
Committee Stage ordered for 1 April 1999.
Seanad Éireann 158 Postal and Telecommunications Services (Amendment) Bill, 1998: Second Stage.