Thursday, July 8, 1999 Published at 12:01 GMT 13:01 UK
Business: The Company File
Windfalls as Telecom Eireann shares soar
The firm is confident it can fight off competition
Shares in the newly privatised Irish telephone company Telcom Eireann soared as trading began in London and Dublin on Thursday.
"Dealing has been absolutely frantic. They are going great guns," commented a spokesman at the Irish stock market.
Nearly one in four adults have taken the chance to buy shares in the state telephone company, doubling at a stroke the number of shareholders in the country.
In the first day of trading the shares rose 25% in Dublin to a price of 4.88 euros compared to an offer price of 3.90 euros.
In total there were 574,000 valid applications. The average shareholder now stands to gain around IR£1,500 (£1,200) if they sell their shares.
The smaller proportion available for foreign institutional investors (such as pension and investment funds) could have been sold out twelve times over.
In the first week only institutions will be able to trade shares, with full trading for the public opening on 14 July.
Ray MacSharry, chairman of Telecom Eireann, said the enthusiastic response, both from members of the Irish public and from institutional investors worldwide, demonstrated "great investor confidence" in Telecom Eireann and provided a solid platform for the company's future as a publicly quoted company.
All valid applications for an amount up to £2,494 (IR£3,000) made on priority application forms will receive their allocation in full.
The average amount applied for by the public was about £5,551 (IR£6,674).
All individual buyers will be eligible to receive bonus shares - one free share for every 25 shares held continuously for the next year.
Mary O'Rourke, minister for public enterprise, said: "This is undoubtedly an historic moment for Ireland.
"We are absolutely delighted with the response to the retail offer from members of the Irish public, many of whom will become shareholders for the first time."
The initial price values the company at 10bn euros ($10.2bn) with the Dublin government raising 5bn euros from the sale of 50.1% of the company.
That is equivalent to about 10% of the national debt.
The privatisation - which also sees its 12,000 staff picking up lucrative holdings worth more than £50,000 - has captured the public imagination like never before.
Currently only 13% of the population hold stock in any company.
As in UK privatisations of the 1980s, such as British Gas, the share price was set low enough to allow a substantial profit.
After the float an employee trust will own 13.2% of all shares, with a further 35% controlled by Comcast, a group owned jointly by Dutch group KPN Telecom and Sweden's Telia.
The focus going forward will be to see how the former monopoly handles what is sure to be a host of new competitors.
It aims to build on its £1.2bn turnover with new investment in Northern Ireland, Britain and elsewhere.
Even with the prospect of fresh competition there are other more general economic reasons for the view that the firm may prove a good bet.
Corporate tax in Ireland stands at 28% but will fall in stages to 12.5% by 2003.
Ireland is forecasting economic growth of 7.75% this year, compared with average European growth of less than 3%.
The more business there is, and the more wealth there is, the larger the market there will be for Telecom Eireann.
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