Deep divisions have emerged between Eircom and its unions over how employees of Eircell should be compensated for having to leave the Employee Share Option Scheme because of the Vodafone deal. The union coalition has put the potential loss to Eircell's 1,300 employees at £45 million (€57 million).

Eircom chief executive Mr Alfie Kane hinted yesterday that some way could be found to compensate employees through the Employee Share Option Trustee (ESOT), which administers the allocation of shares to Eircom employees. However, the chairman of the Eircom union coalition, Mr Con Scanlon, described such a suggestion as "preposterous" and "unsustainable".

Under the existing arrangement, shares are issued in tranches over a five-year period to Eircom employees, to give them a 14.9 per cent holding in the company. Five tranches, accounting for half the shares, have still to be allocated.

Any employee leaving early forfeits further shares. These include 2,000 people who took early retirement. With the sale of Eircell to Vodafone, about 1,300 Eircom employees will lose out on further share options, worth an estimated £34,600 (€43,933) each.

All 260 Eircom technicians on secondment to Eircell are likely to exercise their right to return to the parent company if the problem is unresolved. This would seriously undermine Eircell's viability. The union coalition may also take industrial action in support of more than 1,000 Eircell employees who have been recruited directly by the subsidiary. Union leaders yesterday believed the sale to Vodafone would require the transfer of all Eircell employees briefly to Eircom before the demerger of the mobile phone subsidiary takes place. In this event, they indicated they would support the right of direct recruits to Eircell to stay with Eircom.

At the announcement of the Vodafone offer yesterday, Mr Kane said the company, unions and trustee representatives "have got to find a solution to the problem whereby employees are not deprived of the benefit they would find from remaining in the ESOT". He said the key question was "how do you get the resources to their rightful owners". Union leaders are interpreting Mr Kane's remarks to mean the trustee should provide compensation for Eircell employees, rather than the company. Mr Scanlon said this would be unsustainable and illegal.

"We would have to ballot beneficiaries of the ESOT to change the rules and we would fail because people would not vote to reduce the value of their own shareholding. Such a move would also be open to legal challenge in the High Court."

Mr Scanlon, who represents 9,500 of the 11,000-strong Eircom workforce, accused Mr Kane of "high-wire tactics, leaving this issue out there in the hope that the unions will pay. It won't work."