An Post has been told it must pay an estimated £2 million for parts of its business to be regulated by the telecoms regulator.

Senior figures within the company regard the charge as "excessive", according to an informed source. Ms Etain Doyle took responsibility for the company's universal services - those offered throughout the State - last September. These include postal business for letters up to two kilogrammes and parcels up to 20 kilogrammes.

The regulation is necessary because the State company faces further competition as the EU liberalises postal markets throughout the Union. Thirty per cent of the letter post market will be opened to competition in 2003.

Figures within An Post are concerned that the cost of regulation next year could amount to about a penny on a price of every stamp sold. The company has already claimed its current profit margins are "totally inadequate".

Despite generating revenues of £424 million last year, it reported pre-tax profits from ordinary activities of only £11.7 million.

A spokesman declined to comment when contacted yesterday.

Yet it is understood much of the £2 million will be used by the Office of the Director of Telecommunications Regulation to pay for a consultants' study on the separation of its accounts between its regulated and non-regulated business.

Ms Doyle's office has already sought tenders for this project in the European Journal.

A person familiar with An Post's business said matching finance of £1 million would be required to complete such a study.

This would bring the total cost of regulation to £3 million - about a third of the £9 million profit generated in the regulated business last year.

Any cut on the bottom line would be regarded as serious, another said.

Ms Doyle's spokeswoman said she had a duty to uphold the EU law - enacted by the Government - under which she must regulate An Post's business. Separated accounts were required under that law, she said.

This was contained in a statutory instrument passed by the Government on September 27th which transposed a European directive into Irish law. It is thought senior figures within An Post have let Ms Doyle know they are unhappy with the estimated charge. Still, the State company may be reluctant to formally challenge Ms Doyle's charge as the regulatory relationship between the two sides is in its infancy. Faced with pressure on its profit margins because of rising competition, An Post has initiated a transformation process - to secure annual savings of £27 million by 2003 - linked to a shareholding package for its staff.

Once legislation is enacted next year, this will grant a 14.5 per cent share in the company to its staff - no money will change hands for the stake, worth £2,700 per person, which will be "earned" by work practice changes.