Analysis: the former chief executive made up to €4.5 million from the telecoms company last year, writes Jamie Smyth.

The publication of Eircom's first set of accounts since it became a private company will be remembered for a €3.8 million pay-out made to the firm's former chief executive, Mr Alfie Kane.

Mr Kane, who was in charge when the former State firm was floated and subsequently fell from grace, made up to €4.5 million from the firm last year despite being in charge when a massive slump in the group's value eventually led to its sale.

The Belfast-born telecoms engineer, who spent seven years at the head of Eircom, faced down shareholder anger at the firm's annual general meeting in 2000 before subsequently breaking up the company and selling its rump to a consortium of US venture capitalists.

Former shareholders of Eircom, who have in many cases lost up to 40 per cent of their investment in the company, may be enraged by the scale of Mr Kane's pay-off.

Executive remuneration should be based on performance and few shareholders - apart from those that sold in the early days - will feel Mr Kane delivered.

In Mr Kane's defence, it should be noted that, unlike most executives at publicly quoted firms, he did not receive Eircom share options, which would have been based on performance.

The Government blocked this type of scheme in the run-up to a flotation in 1999 for fear that the process would appear tainted if senior management made windfall profits.

The €104 million pre-tax losses reported yesterday suggest that the former management team of Eircom did not leave the firm in the best shape for Valentia.

But it would be unfair not to recognise that Eircom's new management team are currently tidying up the accounts and will want to get any bad news out in the open early.

Exceptional costs worth some €214 million are detailed in the company's accounts, and these include more than €100 million in takeover costs incurred by the firm.

In contrast to its overall results, Eircom's fixed-line business is performing in line with its European peers and reported a 6 per cent rise in turnover last year.

If the campaign of the new chief executive, Dr Philip Nolan, to significantly reduce the price cap succeeds in the New Year, Eircom will benefit from stronger revenue growth at a time when its rivals are struggling to stay afloat.

Eircom has also managed to cut back on its operating costs within its fixed-line division, which fell 7 per cent to €674 million in the year to the end of March 2002.

So despite the poor headline losses, Eircom will probably prove a valuable proposition when the telecoms sector recovers, and is likely to return to the public market.

But it is doubtful if there would be much public appetite for a second flotation of the firm.

Meanwhile, comparing Mr Kane's remuneration with Dr Nolan's compensation package will have to wait for next year's accounts.

Dr Nolan only joined Eircom last January, therefore his remuneration will probably not be disclosed until December 2003.