RTE expects to lose £12 million (€15.24 million) this year and "smaller" losses will continue in 2001, its spokesman said last night.

The State broadcaster, which has reported an operating deficit of £16.6 million for 1999, expects to return a surplus in 2002 when savings under a restructuring plan agreed last November filter through. Its surplus in 1998 was £3.24 million.

The group will seek a rise in its annual licence fee by the end of the year, its director general, Mr Bob Collins said.

Prof Farrel Corcoran, in his final statement as chairman, said the policy of the RTE Authority was to argue for index-linked increases in the fee. However, it is thought that an initial rise to £110 from £70 may be sought. No decision has yet been taken by the authority on the rise it will seek, it is understood.

The plan to reduce the group's staff by 330 over three years will cost £38 million, which was included as an exceptional expense in its 1999 accounts.

Overall, the group generated a £74.3 million surplus last year, boosted by the sale of its 25 per cent stake in Cablelink to US firm NTL for £123.6 million.

Most of RTE's £197.65 million income last year was generated from commercial activities, with £64.9 million coming from the licence fee.

Television revenues were £83.97 million while income from radio broadcasts was £19.79 million. Revenue from publications and other commercial activity such as programme sales was £25.47 million.

The group spent £191.01 million on television and radio broadcasting. Of this, a rise to £107.7 million from £94.66 million on direct television expenditure reflected increasing programme acquisition costs, its spokesman said.

Separate expenditure on TG4 - formerly Teilifis na Gaeltachta - rose to £6.8 million from £5.69 million in 1998, the report said.

Radio expenditure rose to £28.14 million from £23.8 million. Most of this expenditure was on RTE Radio 1, the group's flagship station. It is thought that the start-up costs of Lyric FM, an arts and music station introduced last year, amounted to £1.5 million while the annual cost of running Raidio na Gaeltachta is about £4.5 million.

The group spent £7.54 million on the "music services" of its two orchestras, string quartet and choirs.

RTE spent £68 million on wages and salaries paid to its 2,199 staff last year. The station does not publish the salaries of high-profile broadcasters whose conditions are negotiated individually.

Prof Corcoran said the last licence fee increase of £8, granted in 1996, was absorbed by the group's responsibility to supply 365 hours programming to TG4 each year.

"Hard questions" must be answered because the dominant value in the digital broadcasting era would be profit, said Prof Corcoran, who was replaced by Mr Paddy Wright at the end of his five-year term last March.

"Great uncertainty persists about how to pay for the standard of broadcasting we expect. Some 67 per cent of RTE's revenue is earned commercial income: the balance comes from the television licence fee," he said.

"Commercial income is, by its nature, uncertain, and broadcasting is an expensive activity, driven by novelty and demanding costly resources and scarce talents."

Under changes expected in the Broadcasting Bill at the end of the year, RTE will sell its existing broadcasting network. While industry observers believe the Government's adviser, AIB, has valued it at £30 million, RTE is thought to maintain that it is worth £60 million or £70 million, if not more. These funds will be used to establish three new digital channels and the group will take a 28 per cent stake in a new digital broadcasting company, which will be known as Digico.