AN Post declined to reveal last night how much it spent buying one of the State's leading Internet providers, Ireland On Line (IOL), but promised it had got good value for the taxpayer.

PostGem, a wholly owned An Post subsidiary, acquired 100 per cent of IOL and said the deal would require no redundancies.

A spokesman for An Post said the figure it paid for IOL was being kept secret for commercial reasons, but pointed out that, before the deal went through, it had to be approved by PostGem, An Post, the Department of Energy, Transport and Communications and the Department of Finance.

"We all believe it was a good deal, and that it was value for money," the spokesman added. "The two companies have been working together for two years now, and what we are buying is the synergy between them."

The takeover puts two State owned companies in direct competition. Last month Telecom Eireann, which is also under the control of the Department of Transport, Energy and Communications, announced its Internet access service.

The spokesman said An Post was now being run along commercial lines and relished the thought of competition with anyone. The new company will continue to use the Ireland On Line brand name, which, An Post believes, has helped build a good reputation for the Internet access provider.

Both PostGem and IOL have about 30 employees. The companies said no one would lose his or her job as a result of the takeover. The two men who founded IOL in 1992, Mr Colm Grealy and Mr Barry Flanagan, are to stay on.

PostGem, which offers electronic mail services in the corporate, leased line market, said it saw the buyout as an investment in the future. The company's chairman, Mr John Hynes, who is also chief executive of An Post, said the Internet market in Ireland was growing each year by 50 per cent.

"It is the fastest growing medium ever and an essential ingredient in electronic communications. IOL, which receives millions of calls a month, is ideal for the development of our business," he added.

Mr Grealy, currently IOL's general manager, said the deal was a further development of the Internet access provider as it headed for the 21st century. "The takeover secures the future of IOL as it gives us the strength and confidence of one of the biggest companies in Ireland. Joining two leaders in the communications business can only mean that Irish Internet users will benefit in the long term," Mr Grealy said.