THE vast majority of suppliers to Telecom Eireann have agreed to a new payment system that, in effect, represents a discount on what is owed to them.

The proposed system replaces cheque payments by an electronic payments service offered by the Bank of Ireland. A letter sent to suppliers says there will be a charge of 30p levied by the Bank of Ireland on each payment transferred to the supplier's bank account. The charge is deducted by the bank from the value of the payment, so the supplier receives the amounted owed, less the 30p on each invoice.

A spokesman for Telecom told The Irish Times it had sent out the notification to 5,000 suppliers. It has had a response from 1,600 with 94 per cent expressing enthusiasm for the new system. Only 4 per cent did not want to use the new system.

Some small suppliers have expressed outright disapproval of the new system. One said the supplier is, in effect, paying Telecom's bank charges. Is this, the supplier said, another case of a major semi-State company which already takes 45 days to pay bills, using its monopoly position to pay less?

Another supplier is also opposed but is undecided on his company's response. In the process of tendering for new business against other European suppliers he is afraid to rock the boat. The suppliers have been reluctant to be named because they want to continue doing business with Telecom Eireann.

In common with others, they are afraid if they don't play ball they might be boycotted in the future.

However, Telecom stressed that there is no obligation on any supplier to change over to the electronic service system, noting they can still pay by cheque. He also noted that those receiving cheques have to pay their own bank l8p per transaction. The new proposals are supplier friendly, he added.

The fetter said the electronics payments service "will allow funds to be credited directly to your company bank account. In addition our bank will issue remittance advices to you one day prior to payment value date". Also the bank will forward the remittance advice by fax or alternatively by electronic data interchange.

Telecom has argued that the new system will prove to be more effective and will offer a number of advantages to both Telecom and its suppliers. These are listed as it will eliminate cheques delayed or lost in the post. It will reduce time spent in handling and lodging cheques. The supplier will receive one day's notice of funds arriving at its bank account. Where suppliers who had previously received a number of cheques from different Telecom districts in any one week, the supplier will, in future, receive a single combined payment.

Last week, the European Commission approved Telecom Eireann strategic proposals. Under the alliance plan Commsource, a consortium of KPN of The Netherlands and Telia of Sweden, is to pay at least £183 million for an initial 15 per cent stake. There is an option to buy a further 20 per cent.